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II. Direct Tax Case laws:
1. M/s
Dalal & Broacha Stock Broking Pvt. Ltd. Vs. ACIT, Writ Petition (L)
No. 419 of 2013, Date of Pronouncement: 07-05-2013, Bombay High Court
Section 148 of the Income Tax Act, 1961
Whether
reopening of assessment u/s 148 of the I.T Act, 1961 is valid when made
on the basis of subsequent judgment of the Special Bench of Tribunal in
Petitioner’s own case in preceding year.
Held: Yes
The
AO cannot reopen an assessment merely on the basis of a change of
opinion, however, when he has tangible material to come to the
conclusion that there is an escapement of income from assessment, the
power to re-open can be exercised.
(Please click here for judgment)
2. REI Agro Ltd. Vs. DCIT, ITA No. 1331/Kol/2011 and DCIT Vs.
REI Agro Ltd., ITA No. 1423/Kol/2011, Date of pronounce: 19.06.2013,
ITAT - Kolkata
Section 14A of the Income Tax Act, 1961 r.w. Rule 8D of the Income Tax Rules, 1962.
Whether
interest expenditure can be disallowed by mechanically applying the
provisions of Rule 8D where there is no linkage or nexus is established
between funds borrowed by assessee and impugned investments and AO has
also not recorded his satisfaction with correctness of the claim of
assessee.
Held: No
It
is an admitted position in law that expenditure can be disallowed
U/s.14A of the Act if and only if it is incurred in relation to income
which does not form part of total income.
The
assessee has explained that the share capital and reserves, that is its
own funds, were utilised for the purpose of investment in shares for
earning dividend income and this has not been negated by lower
authorities i.e. neither CIT(A) nor AO. The assessee has also explained
each and every investment with sources of funds and its utilization as
well as opening application of funds and closing application of funds.
Thus, it is clear that the investment in shares was made out of own
capital employed and not from borrowed funds and there is no link with
expenditure for earning of dividend income incurred by the assessee and
once the facts are clear, no disallowance can be made by invoking rule
8D. Further, neither the AO nor CIT(A) has recorded any finding that
having regard to the account of assessee, they are not satisfied with
the correctness of the claim of expenditure made by assessee or the
claim made by assessee that no expenditure has been incurred in relation
to income which do not form part of the total income under the Act for
the relevant A.Y. In the absence of any such finding, no disallowance on
account of interest expenditure can be made by invoking rule 8D of the
Rules. Accordingly, in the given facts and circumstances, we delete the
addition and allow this issue of assessee’s appeal.
(Please click here for judgment)
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