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2016 (11) TMI 366 - AT - Income TaxDisallowance u/s 14A - restriction to amount allowed - Held that:- Reasonable disallowance has to be made in view of provisions of Section 14A of the Act to disallow expenditure incurred in relation to earning of exempt income having regard to the accounts of the assesseee as per mandate of Section 14A of the Act. We have observed that the assessee has earned dividend income of ₹ 10,19,208/- which was claimed as exempt income u/s. 10(34) of the Act and the ld. CIT(A) has restricted the disallowance u/s 14A to ₹ 1 lac. In our considered view, the disallowance of ₹ 1 lac u/s 14A of the Act keeping in view factual matrix of the case is quite reasonable. The A.O. has not undertaken any exercise to work out the disallowance having regard to the accounts of the assessee and merely applied Rule 8D of Income Tax Rules, 1962 in a mechanical manner which cannot be applied for the assessment year 2007-08 and earlier years in view of Hon’ble Bombay High Court decision in the case of Godrej and Boyce Manufacturing Company Limited(2010 (8) TMI 77 - BOMBAY HIGH COURT). Keeping in view of the peculiar facts and circumstances of the case , the ground raised by the Revenue in this appeal w.r.t. computation of disallowance u/s 14A of the Act of the expenditure incurred by the assessee in relation to earning of exempt income lacks merit and is hereby dismissed and we confirm the disallowance u/s 14A of the Act to be at ₹ 1 lacs for the assessment year 2007-08 as sustained by learned CIT(A). Addition on account of provision for write off of the dies - whether no actual sale or disposal of dies has taken place during the year of the old dies which has been shown as written off whereas actually the amount written off is in the nature of provision only? - Held that:- It is the say of the assessee that the dies left with the assessee with respect to Chakan Plant cannot be used because of the various restrictions on the assessee due to the non-compete agreement clauses. It is the say of the assessee that now these dies cannot be used by the assessee and also have became obsolete because of the agreement with MFL whereby the assessee agreed not to compete with MFL in persuant to demerger of Chakan Plant in favour of MFL and non compete-agreement with MFL. As per the assessee these dies were sold in the assessment year 2012-13 for a cost of ₹ 99.93 lacs which has been offered for taxation. All this above contentions of the assessee needs verification and examination both on facts and on legal grounds about the validity and legality of the allowability of the claim of the assessee with respect to write off of old and obsolete dies to the tune of ₹ 1,99,00,801/- and in our considered view, the matter/issue needs to be set aside and restored to the file of the A.O. for necessary verification and examination , and de-novo determination of the issue by the AO on merits. Disallowance of debit balance of creditors written off - failure to prove that the advances were given for the purpose of business and efforts were made for collection of the amounts advanced to the sundry creditors - Held that:- We have observed that the assessee has written off of sundry advances to the tune of ₹ 69,55,477/- and also there was a claim of deduction by MFL of ₹ 1.78 crores in the scheme of demerger of Chakan Plant whereby there was a claim of diminution in the value of debtors and inventories by MFL from the assessee , which was settled for at ₹ 1.10 crores between MFL and the assessee whereby MFL will deduct these amounts from the consideration payable to the assessee and the assessee wrote off the said amount in its books of accounts. The assessee submitted that all the details were given before the Revenue while revenue is disputing the same as complete details were not given nor justification for claiming as business loss or business expenditure as per provisions and scheme of the Act was not given by the assessee with respect to advances of ₹ 69.55 lacs written off and also with respect to the other claim of ₹ 110 lacs . In our considered view, the details submitted by the assessee requires verification and examination of both the claims by the AO on merits in accordance with law .
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