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2013 (8) TMI 369 - AT - Income TaxAdministrative expenses for earning dividend income from mutual fund Disallowance under Section 14A of the Income tax act Investment in units of mutual funds made by the assessee stood at Rs. 6.03 crores as on 31-03-2001 which was increased to Rs. 18.32 crores as on 03-03-2002 Held that:- Although the investment in mutual funds had been made by the assessee out of its own funds and there was no interest expenditure incurred in relation to the earning of dividend income, the portion of administrative expenses incurred by the assessee was certainly attributable to the earning of the said income - Since no working whatsoever was given by the assessee showing the expenses attributable to the earning of dividend income, estimation of such expenses on proportionate basis to quantify the disallowance u/s 14A of the Act was very much called for - 2% of the dividend income has been held to be reasonable consistently by the Tribunal in various cases - Restrict the disallowance u/s 14A of the Act at 2% of the dividend income. Eligibility of expenses for deduction in under section 80IB Held that:- There has to be a direct or first degree connection of the income and the business of the eligible undertaking in order to be eligible for deduction u/s 80IB of the Act - Three items of other income are such that the immediate source thereof cannot be said to be the business of eligible undertaking and this being so, all these items of income cannot be said to be eligible for deduction u/s 80IB of the Act Decided against the Assessee. Reducing the amount eligible for deduction u/s 80IB of the Act while computing profits of the business for the purposes of deduction u/s 80HHC of the Act Relying upon the decision in the case of Hon'ble Bombay High Court in the case of Associated Capsules (P.) Ltd. vs. DCIT [2011 (1) TMI 787 - BOMBAY HIGH COURT], it was held that profits of business for computation of deduction u/s 80HHC of the Act are not to be reduced by the profits of business allowed u/s 80IA of the Act Decided in favor of Assessee. Deduction under section 80IB - Assessee is engaged in the business of manufacturing of agro chemical products and seeds and processing charges received by the assessee Held that:- Nature of processing charges received by the assessee is not very clear as neither the A.O. nor the ld. CIT(A) has given any finding in this regard so as to ascertain as to whether the processing charges were received by the assessee for manufacture of agro chemical products and seeds on job work basis with material supplied by the customers - Claimed by the ld. Counsel for the assessee - While arguing a similar issue in earlier years that the recovery of processing charges was nothing but reimbursement of expenses - Contention raised by the ld. Counsel for the assessee relying on the decision of Hon'ble Madras High Court in the case of Taj Fire Works Industries [2006 (6) TMI 60 - MADRAS HIGH COURT] which involved different facts. Accordingly, it is held that all the four items in question of other income are such that they cannot be said to be profit derived from the eligible undertaking of the assessee eligible for deduction u/s 80IB Decided against the Assessee.
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