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2016 (3) TMI 314 - AT - Income TaxDisallowance u/s 14A - Held that:- Section 14A of the Act stipulate for disallowance of said expenditure which are incurred in relation to earning of exempt income while Rule 8D of Income Tax Rules, 1962 is a machinery provision which provides for method of computing disallowance u/s 14A of the Act . We have observed that there was a closing balance of ₹ 10.13 crores in the mutual fund as on 31-3-2010 while the average investment held by the assessee company in Mutual Fund during the previous year was ₹ 6.33 crores. The assessee company also submitted that no borrowed funds have been utilized for earning the investment. In our considered view, the authorities below have rightly applied the Rule 8D of Income Tax Rules, 1962 in the instant case as the relevant assessment year is 2010-11 while Rule 8D of Income Tax Rules , 1962 is applicable from the assessment year 2008-09 , keeping in view the peculiar facts and circumstances of the case which we have discussed hereinabove in this order. - Decided against assessee Disallowance of claim of service charges u/s 40A(2)(a) and 37(1) - Held that:- As submitted by the assessee company, Shri Ubhayakar was providing services to both the companies. The assessee company was debiting 90% of salary of Sh Ubhayakar till 30-04-2008 to M/s Pidilite Industries Ltd. i.e. prior to transfer of employees w.e.f. 01-05-2008 in pursuance of demerger of the manufacturing unit of the assessee company w.e.f 01-04-2007 which was approved by Hon’ble High Court w.e.f 18.01.2008. Shri Ubhayakar was transferred to M/s Pidilite Industries Ltd. w.e.f 01-05-2008 and M/s Pidilite Industries Ltd. started debiting 10% of the salary on which due services taxes have also been paid to the Government. From the facts and circumstances of the case emanating from the record, this practice was continuing earlier also and was accepted by the Revenue in the preceding assessment years also . The assessee company has placed on record the debit notes so raised for earlier year’s also which is placed in paper book page 20-26, which are accepted by the Revenue for earlier years. The principles of consistency has to be followed as laid down by Hon’ble Supreme Court in the case of Radhasoami Satsang (1991 (11) TMI 2 - SUPREME Court ) although we are aware that principles of res-judicata are not strictly applicable to income tax proceedings. In view of our above discussions and reasoning, the addition made by the AO and as confirmed by the CIT(A) by disallowing expenditure towards salary of Sh Ubhayakar being 10% of the total salary being debited to the assessee company, is hereby deleted and we allow the appeal of the assessee company. - Decided in favour of assessee
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