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2015 (3) TMI 57 - AT - Income TaxDisallowance u/s 14A - Held that:- The investment made by the assessee would be out of interest free funds available with the assessee and, consequently, no disallowance could be made u/s 14A of the Act. In view of the fact that the assessee’s share capital with reserves and surpluses is far in excess of the amount invested in securities fetching exempt income, there can be no question of disallowance of interest amounting to ₹ 8,22,725/-. The disallowance to this extent is deleted. As regards the remaining part of disallowance at ₹ 1,23,503/-, we find that the same is in accordance with law as per Rule 8D(2)(iii), being an amount equal to ˝% of the average of the value of investment. Since the assessment year under consideration is 2009-10, the mandate contained in Rule 8D applies as per the judgment Maxopp Investments Ltd. Vs. CIT (2011 (11) TMI 267 - Delhi High Court), therefore, sustain the disallowance u/s 14A at ₹ 1,23,503/-. - Decided partly in favour of assessee. Disallowance of prior period expenses - Held that:- Commissioner of Industries, Government of NCT of Delhi, vide notice of demand dated 19.6.08, raised a demand of ₹ 42,000/- towards apportioned cost of common Effluent treatment plant. From a copy of this notice, which has been placed on record, it can be seen that the assessee was directed to pay ₹ 42,000/- towards demand pertaining to financial year 2006-07 and 2007-08. The otherwise deductibility of such expenses has not been disputed by the AO. Since this amount became payable by virtue of notice of demand issued by the Government on 19.6.08, the same, in our considered opinion, is rightly allowable as deduction. Overturning the impugned order on this score, we order for the deletion of addition. - Decided in favour of assessee. Disallowance of legal expenses - Held that:- Advocate’s fees of ₹ 7,500/- for seeking bail in respect of the offence committed by the assessee’s driver is not allowable in terms of Explanation to section 37(1) which prohibits deduction of any expenditure incurred for any purpose which is an offence or which is prohibited by law. In so far as other component of the disallowance, namely, ₹ 3,000/- is concerned, we find that this is in respect of certification charges of the net worth of directors, which certificates were used for obtaining loans by the company from banks. This expenditure, in our considered opinion, is deductible as per law. - Decided partly in favour of assessee.
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