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2017 (5) TMI 1784 - ITAT MUMBAIDisallowance u/s 14A r.w.r 8D - Excess of own funds - assessee submits that the investment during the year were from the surplus available and thus, the investments were not out of borrowed funds, therefore, it is stated that no disallowance u/s 14A be made - HELD THAT:- As in Avon Cycles Ld. vs. CIT [2014 (9) TMI 207 - PUNJAB & HARYANA HIGH COURT] it is held that where funds utilized by assessee were mixed funds and part of it was invested in earning tax free dividend income, it was held that the interest paid on borrowed fund was also relatable to interest on investment made in tax free funds. Therefore, interest expenditure relatable to investment in tax free funds was to be computed under provisions of Rule 8D (2)(ii). In CIT vs. HDFC Bank Ltd [2016 (3) TMI 755 - BOMBAY HIGH COURT] it is held that the presumption laid down in CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]with regard to investment in tax-free securities coming out of the assessee’s own funds in case they are in excess of the investments made in securities (notwithstanding the fact that the assessee concerned may also have taken some funds on interest) applies, when applying section 14A of the Act. It is reiterated again in HDFC Bank Ltd. [2016 (3) TMI 755 - BOMBAY HIGH COURT] The order of the Ld. CIT(A) on the above issue is set aside and the same is restored to the file of the A.O. to make an order keeping in mind the principles delineated here-in-above after giving a reasonable opportunity of being heard to the assessee. Thus, 1st ground of appeal is allowed for statistical purposes. Addition as unproved purchases - HELD THAT:- We find that the transactions with Ashirwad Broker, Lalitbhai Dalal, Madhav Broker do not figure in the order passed by the Tribunal in the assessee’s own case for the A.Y. 2007-08. Therefore, the issue in instant appeal is to be decided on its own facts. The Hon'ble Supreme Court in State of Kerala vs. Shaduli Grocery Dealer [1977 (3) TMI 160 - SUPREME COURT], recognized the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return of income necessarily carries with it the right to examine witness and that includes equally the right to cross-examine witness. Thus, the order of the Ld. CIT(A) on the above issue is set aside and the same is restored to the file of the A.O. to pass an order after examining the above three parties and allowing the assessee to cross-examine them. The assessee is directed to file the relevant details before the A.O. Thus, the 2nd ground of appeal is allowed for statistical purposes. Disallowance of commission paid to the managing director and the executive director u/s 36(1)(ii) - HELD THAT:- We find that the same issue arose before the ITAT ‘F’ Bench Mumbai in assessee’s own case for the immediate preceding assessment year 2007-08. The Tribunal observed that (i) the Ld. CIT(A) has rightly held that the A.O. has not demonstrated that the expenditure incurred was excessive, (ii) the directors have declared the commission in their return of income and are being assessed to tax at maximum marginal rate. Therefore, the Tribunal dismissed the appeal filed by the revenue on the above issue.
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