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2017 (9) TMI 108 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - interest towards investments made in the Fund - Held that:- As balance sheet indicates the assessee’s net worth at ₹ 70.85 crore. As against the shareholders’ fund of this magnitude, the assessee made investment in the Fund, yielding exempt dividend income, only to the tune of ₹ 1.00 crore and odd. This shows that investment in Funds is much less than the assessee’s shareholder’s fund. The Hon'ble Karnataka High Court in CIT & Anr vs. Microlabs (2016 (4) TMI 219 - KARNATAKA HIGH COURT) has held that when investments are made from common pool and non-interest bearing funds are more than the investment in tax free securities no disallowance of interest expenditure u/s 14A can be made. Disallowance being ˝% of the average value of investment - Held that:- As the assessee suo motu offered disallowance of ₹ 25,003/- u/s 14A in its return of income. This factual finding recorded on page 19 of the impugned order has not been controverted by the ld. DR. If the assessee offered disallowance of this magnitude, then naturally the total amount of disallowance u/s 14A ought to have been reduced with the amount already offered by the assessee. In the given circumstances, we sustain the disallowance u/s 14A read with Rule 8D(2)(iii) for a sum of ₹ 46,361/- (Rs.71,364/- (-) ₹ 25,003/-). Addition on account of downward sales adjustment - As in the immediately preceding year tribunal upheld the deletion of addition except for reconciliation difference, which, in the preceding year, was ₹ 1.15 crore and in the current year is ₹ 7.45 lac. In the absence of any distinguishing facts having been brought to our notice either by the assessee or by the Department, respectfully following the precedent, we order for the deletion of addition of ₹ 3.20 crore and remit the matter to the Assessing Officer as regards reconciliation difference amounting to ₹ 7.45 lac to be decided in conformity with the view canvassed in the preceding year pursuant to the order passed by the Tribunal. Addition on account of interest - Held that:- AR has brought to our notice that such amount was suo motu added by the assessee in its computation of total income for the immediately succeeding year, namely, A.Y. 2011-12. It was submitted that a direction may be given to delete such suo motu addition. In view of the fact that we have upheld the addition of ₹ 55,92,096/- and ₹ 12,828/- in the instant year, if these amounts were, in fact, suo motu added by the assessee in the computation of total income for succeeding year, then, the same should be deleted. We direct the Assessing Officer to verify the assessee’s contention in this regard and, if the same is found to be true, then, the corresponding relief should be given in the assessment of the succeeding year.
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