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2015 (11) TMI 858 - ITAT AHMEDABADDisallowance out of fees and legal expenses - CIT(A) deleted the addition - Held that:- We find that the genuineness of the payment is not in dispute. The Assessing Officer after observing about the loss incurred by the assessee company has brought no material on record after making investigation to show that the assessee has not received the services for which payments were made by the assessee. Rather, on the other hand, the allowance of deduction at the rate of 50% shows that the Assessing Officer also agreed that services of the staff of the payee company were utilized by the assessee company for its business purpose. No material was brought on record to show that the consideration for services received by the assessee was so excessive as to warrant any disallowance out of the same. It is also observed that the amount of consideration paid was as per Memorandum of Understanding entered into by the assessee with the payee company. In view of the above facts and circumstances, we do not find any good reason to interfere with the order of the Ld.CIT(A) - Decided against revenue. Disallowance of employees contribution to Provident Fund u/s.36(1)(via) - CIT(A) deleted the addition - Held that:- This issue has been decided against the assessee in A.Y. 2007-08 by co-ordinate Bench following the judgment of Hon'ble Gujarat High Court in case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] to held that with respect to the sum received by the assessee firm from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va) - Decided against assessee. Disallowance u/s.14A read with Rule 8D - Held that:- firstly the AO is required to find out the nexus between the expenditure incurred and exempt income. If the expenditure is not related to the exempt income, in our considered view the AO is not empowered to make disallowance u/s.14A of the Act by applying Rule 8D of the Income Tax Rules. Thus, first requirement of law is that the expenditure should be related to the exempt income. In case, where the assessee makes a claim that 'x' amount is related to the exempt income or otherwise no expenditure is related to the exempt income, in that event, the AO has to satisfy himself about the correctness of the claim having regard to the accounts of the assessee before proceeding to apply Rule 8 D of the Income Tax Rules, 1962 for computing disallowance. Hence, another requirement of law is that the AO has to satisfy himself about the correctness of the claim of the assessee having regard to the accounts of the assessee. The provision of section 14A mandates the AO to examine the accounts of the assessee before proceeding to apply Rule 8D of the IT Rules. In the present case, the AO has made disallowance on account of interest expenditure and administrative expenses. Since on both the counts, the AO has failed to record his finding, we are of the considered view that disallowance as made by the AO cannot be sustained.- Decided against revenue.
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