Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (12) TMI 524 - AT - Income TaxAddition u/s. 14A r.w.r. 8D - Addition on account of interest made by AO - HELD THAT:- The assessee thus had sufficient own funds available at the relevant time to make the said investment and there was a presumption that the said investment was made by the assessee company out of its own free funds as held in the case of CIT vs. Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] The investment capable of earning exempt income thus was entirely made by the assessee-company out of its own free funds and there being no utilization of interest bearing borrowed funds for making the said investment, we find merit in the contention of the ld. Counsel for the assessee that disallowance on account of interest made by the Assessing Officer u/s. 14A and sustained by the ld. CIT(A) is liable to be deleted. Disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) on account of other common expenses by applying Rule 8D(2)(iii) - We direct the Assessing Officer to re-compute the disallowance to be made u/s. 14A of the Act by applying Rule 8D(2)(iii) of the Rules on account of other common expenses by taking into consideration only those investments on which exempt income was actually earned by the assessee during the year under consideration. Ground no. 1 and 2 of the assessee's appeal are thus partly allowed. Disallowance of interest - business expediency of the investment made by the assessee in the debentures of M/s. Kunal Spaces Pvt. Ltd. was not established - HELD THAT:- As sufficient own funds in the form of share capital and free reserves to the tune of ₹ 30.73 crores were available with the assessee-company at the relevant time and the same being sufficient to make the entire investments including the investment made by the assessee-company in the debentures of M/s. Kunal Spaces Pvt. Ltd., we are of the view that no disallowance on account of interest as made by the Assessing Officer and sustained by the ld. CIT(A) was called for as there was no case of utilization or diversion of the interest bearing loan borrowed by the assessee-company for non-business purpose. In that view of the matter, we delete the disallowance made by the Assessing Officer and sustained by the ld. CIT(A) on account of interest and allow ground no. 2 of the assessee's appeal. Addition on account of director's remuneration - as noticed by AO that there was increase of director's remuneration by ₹ 3 lakhs during the year under consideration as compared to the immediately preceding assessment year - HELD THAT:- Remuneration paid by the assessee-company to its directors during the year under consideration was duly justified by the assessee-company with reference to their qualification and experience as well as the services rendered to the assessee-company and without bringing on record anything to show that the remuneration so paid by the assessee-company to its directors was excessive or unreasonable, the authorities below were not justified to make a disallowance of ₹ 3 lakhs on account of director's remuneration simply because there was an increase of 20% while the other expenditure incurred by the assessee-company had declined. We also find that there is nothing brought on record by the authorities below to show that the increase of 20% in the director's remuneration was excessive or unreasonable so as to disallow the same. We, therefore, find no justification in the disallowance made - Decided in favour of assessee. Disallowance of rental expenses - DR has contended that this claim now being made on behalf of the assessee regarding the total area of 7500 sq.ft. taken on rent requires verification since the same is contrary to the finding recorded by the authorities below in this regard - HELD THAT:- We find merit in the contention of the ld. DR and since the ld. Counsel for the assessee has not raised any objection for sending the matter back to the Assessing Officer for proper verification, we restore this issue to the file of the Assessing Officer for deciding the same afresh after verifying the claim of the assessee regarding the actual area taken on the rent for its office premises. Appeal of the assessee is partly allowed.
|