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2014 (9) TMI 1099 - AT - Income TaxAddition made u/s 14A read with Rule 8-D - CIT-A deleted the addition - Held that:- Admittedly, the A.O. has computed the disallowance u/s 14A read with Rule 8-D. It is a settled law that Rule 8-D is applicable from A.Y. 2008-09, hence, not applicable for the year as held in the case of Godrej and Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT ] - Decided against revenue Attribution of in-direct and direct expenditure for earning the exempt income - Held that:- We find that the total investment made during the year were at ₹ 9.39 crores. We also find that the assessee had profit on sale of investment at ₹ 21.55 crores, net profit during the year at ₹ 48.15 lacs and funds available on account of sale of investment during the year at ₹ 38.31 crores. In our considered opinion, the assessee was having sufficient own funds for making the investment of ₹ 9.39 crores. As own funds are found to be far in excess of the investment, we do not find any reason for making the disallowance at ₹ 50 lacs. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the additions sustained by the ld. CIT(A). - Decided against revenue Restricting the disallowance on account of administrative and managerial expenditure at 5% of the exempt income - Held that:- We have carefully perused the order of the Tribunal in assesse’s own case [2010 (10) TMI 214 - ITAT MUMBAI]wherein ITAT has confirmed the disallowance on account of administrative and managerial expenses u/s 14A of the Act to the extent of 5% of the total exempt income. Respectfully following the findings of the Tribunal, the ld. CIT(A) has restricted the disallowance. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A).- Decided against revenue Disallowance of interest expenditure - Held that:- Total own funds available with the assessee was at ₹ 98.15 crores. The assessee has purchased fixed assets of ₹ 37.02 crores which is out of loan funds taken during the year thereby leaving the assessee net own funds of ₹ 98.14 crores. The investment made during the year is at ₹ 103.69 crores which means that ₹ 5.55 crores have been invested not out of own funds. Taking average rate of interest as taken by the ld. CIT(A) at para 9 of his order which is 4.35%. The total disallowance on account interest comes to ₹ 24 lacs approximately. Considering the above factual facts and figure, we direct the A.O. to restrict the disallowance to ₹ 24 lacs on this account.
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