VOLTAS LIMITED,MUMBAI vs. DY COMMISSIONER OF INCOME TAX RANGE-8(3)(1), MUMBAI

In spite of issue of notice, none appeared on behalf of the assessee nor any adjournment was sought. Thus, we proceed to dispose off this appeal with the assistance of Ld. DR.

Ld. DR brought to our notice the relevant facts on record and vehemently supported the orders of the authorities below.

In various grounds of appeal, assessee has challenged the disallowance made under Section 14A read with Rule 8D of the Rules of Rs.2,83,34,860/-. The facts in brief qua the issue involved are that the assessee-company has received dividend income on investments aggregating to Rs.83,76,70,921/- and has claimed Rs.76,70,83,033/- as exempt dividend income. The dividend income received from overseas companies aggregating to Rs.7,05,87,888/- was offered to tax under the head ‘Income from Other Sources’. Before the Assessing Officer, assessee submitted that it has made suo moto disallowance of Rs.31,00,000/- under Section 14A of the Act in the computation of total income. Another contention was that for past several years assessee- company had generated substantial amount of fund from sale of 3 ITA.NO. 1903/MUM/2022 (A.Y: 2016-17) Voltas Limited fixed assets and investments apart from business profit earned. It has also made investments in subsidiaries and joint venture companies and also strategic business investments for which it had not borrowed any money for investing in shares or securities and all the investments were through own resource generated from profits and sale of investments. Thus, no interest expenditure can be attributable to the exempt income. Insofar as justification for suo moto disallowance, it was contended that investments are attended to by the MIS department, which is primarily responsible for accounts and banking operations, and there is no separate investment department. The overall cost of operating and administrative expenses of MIS department was only Rs.105.95 lacs. Accordingly, assessee had worked out the expenditure of Rs.31 lacs which has been offered to tax stating to be reasonable and fair apportionment of overall MIS department expenses including salary, administrative, operating and other expenses. The working was given in the following manner :- Total Proportionate Expenses Amount offered - Staff Costs 82.37 26.00 - 23.58 5.00 Operating & Administrative,

After hearing the Ld. DR and on perusal of the relevant finding given in the impugned order, we find that insofar as interest expenditure is concerned, no disallowance has been made, however, the Assessing Officer has made disallowance under Rule 8D(2)(iii) without prima facie recording satisfaction whether the expenditure debited to the profit and loss account can be said to be attributable for earning of exempt income. The assessee had specifically pointed out that one particular MIS