Tag: #expenditure

-Report by Sakshi Tanwar

The current petition for Letters of Administration has been filed by the mother [petitioner no.1], father [petitioner no.2], and brother [petitioner no.3] of the late Dr. Shruti Maitri,who died in Delhi on March 8, 2019. The LoA has been claimed in relation to properties.

FACTS

The second respondent is admittedly the deceased’s spouse, while respondents 3 and 4 arebodies formed to administer superannuation money in the Australian state of New SouthWales. According to the petitioners’ acknowledged case, the deceased married the secondrespondent in Delhi on December 3, 2017, in accordance with Hindu norms. According totheir claim, the deceased was injured on 02/03 February 2019 and travelled to India on 01March 2019 for necessary medical procedures and treatment. The petitioners also state thatthe deceased was admitted to a hospital on March 4, 2019, and underwent surgery onMarch 5, 2019. According to reports, the deceased developed a pulmonary embolism as aresult of post-operative complications on March 7, 2019, and died on March 8, 2019. The petition was based on an assumption that the first petitioner had been nominated as the beneficiary of the superannuation funds. In terms of an intimation dated 19 August 2019,the first petitioner was informed by respondent no. 3 of the proposed release of all monies standing to the credit of the superannuation fund of the deceased in favour of the secondrespondent.

APPEALANT’S CONTENTION

The petitioners maintained that because the deceased was an Indian citizen working inAustralia on a work permit, her inheritance would be administered under Indian law. Thepetitioners claimed in paragraph 35 of the current petition that the deceased had identifieda flat in Australia and, since she had not been given Permanent Resident status in thatcountry, the flat was purchased in the name of the second respondent. It is conceded thatthe flat was mortgaged and the instalments in respect thereof were paid out of the jointaccount maintained by the deceased and the second respondent. The petition for the grant of LoA was essentially based on the petitioners’ assertion that because the deceased and the second respondent purchased the properties in Australia together, with the formermaking substantial investments therein, the petitioners would be entitled to the grant of LoA by virtue of being the parents. Their claimed case was that the second respondent, thehusband,

is barred from pre-marriage and paternal assets. On 19 December 2019, the Court granted an injunction restraining the second respondent from either alienating or creating third-party interests in the immovable property in Australia or receiving superannuation funds standing to the credit of the investments made by the deceased. The Court also restrainedRespondent No. 3 from releasing any payments to either the second respondent or any third party.

RESPONDENT’S CONTENTION

The second respondent has filed objections to this petition, citing records kept by the FirstState Super Trustee Corporation, a body corporate established under the SuperannuationAdministration Act, 19965, as well as records kept by the State Super Financial ServicesAustralia Limited, to argue that the second respondent was the sole beneficiary of thesuperannuation funds. Reliance was also placed on the adjudicatory orders passed by theAustralian Financial Complaints Authority8 which too had recognized the right of thesecond respondent to be the sole beneficiary of all funds of the deceased held withrespondent no.3.

JUDGEMENT

The law, as it presently stands, does not envisage a parent who may have incurredexpenditure in the upbringing of a child being viewed as a creditor. Accordingly, and forall the aforesaid reasons, the petition fails and shall stand dismissed.

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–Report by Shreya Gupta

In any circumstances, the interest expense cannot be denied u/s14A r.w. Rule 8D(2)(ii) of the IT Act. The disallowance made by adopting Rule 8D is not only opposed to the statutory requirement, but also to the legal principles established.

FACTS:

The case is an appeal by the petitioner against the order passed by the Income Tax Appellate Tribunal in which the court allowed the respondent’s appeal. The respondent filed a return for the income of Rs.358,47,29,328/- under normal provisions and book profit of Rs.431,48,93,079/- under section (u/s) 115JB of the I.T. Act. The AO made various disallowances u/s.14A r.w. Rule 8D amount to Rs.5,11,85,000/-. The AO investigated u/s 143(2) of the I.T. Act 1961. The case then went to The Ld. CIT (A) which allowed the respondent’s appeal but then the case went to the Hon’ble ITAT which again ruled in favor of the respondent. 

PETITIONER’S CONTENTIONS:

The petitioner contended on the previous orders by the courts given against his favor and asked if they were correct. He contended that “the assessment order that setting-off interest costs of dividend income against other taxable income areagainst the matching concept of income and expenditure. He submitted that there was no need to rely on any presumption of own funds on account of the changed law that came into force from 2007-08 followed by the introduction of rule 8D in 2008- 09 which provides for a method of calculations. It is submitted that because of the above, the ITAT erred in endorsing the CIT(A)’s order which drew the presumption of its interest-free funds. He further submitted that the ITAT ought not to have deleted the addition of interest disallowed by the AO, in the absence of any evidence that indicated that borrowed funds were not used to make investments that yielded exemption. He further submitted that the ITAT ought not to have been considered interest while calculating disallowance u/s. 14A read with Rule 5D since the assessee had not maintained a separate account for the investment related to exempt income.” 

RESPONDENT’S CONTENTIONS:

The respondent took the court through previous orders and stated that they were correct u/s. 14A read with Rule 8D (2)(ii) and prayed that the appeal deserves to be dismissed. In justification to his arguments, he took the help of the previous cases Godrej & Boyce Manufacturing Co. Ltd. Vs. Deputy Commissioner of Income-Tax and Another and South Indian Bank Ltd. vs. Commissioner of Income-tax. 

JUDGEMENT:

The court stated that “To put it another way, in respect of payment made out of the mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to estimate a proportionate figure.” The court stated that the AO has not recorded that there was any inadmissible expenditure u/s 14A. He stated that there are no powers u/s 14(2) which allow AO to apply Rule 8D straightaway without considering the correctness of the assessee’s claim in respect of expenditure incurred concerning the exempt income. The court further stated that the interest expenditure cannot be disallowed u/s14A r.w. Rule 8D(2)(ii) under any circumstances and therefore dismissed the appeal.

READ FULL JUDGEMENT: https://bit.ly/3KIgkDN