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2021 (10) TMI 567 - Income Tax
Disallowance u//s 14A - disallow the expenditure incurred in relation to earning of exempt income - contention of the assessee so far interest expenditure claimed by the assessee is concerned that related to specific loans and did not relate to the investment out of which the assessee had earned dividend income - HELD THAT:- It is well settled law that for making disallowance u/s 14A of the Act, there has to be an expenditure related to the exempt income which has been charged in P & L Account by the assessee. It is the contention of the assessee that so far interest expenditure is concerned, firstly, it related to specific loans and were not related to exempt income and secondly, the investment was made way back in the share of bankers of the assessee, such shares were kept in DEMAT account.
So far, the administrative expenses i.e. are concerned, there is no dispute with regard to the fact that Rule 8D of the Income Tax Rules, 1962 is in operation for Assessment Year under consideration - we restrict the disallowance to the extent of the administrative expenses one-half percent of the average of the value of investment as on the first day and the last day of the previous year i.e. ₹ 9,44,000/- i.e. 4,720/-. Thus, Ground No.1 raised by the assessee is partly allowed.
Disallowance of interest and not allowing the depreciation thereon which was treated by the AO being incurred on capital expansion - Capitalization of interest was rejected on the basis that before the Assessing Officer, such ground could not have been taken without claiming it in the return of income. In support of this, Ld.CIT(A) has placed reliance on the judgement of Goetze India Ltd. vs CIT [2006 (3) TMI 75 - SUPREME COURT] - HELD THAT:- CIT(A) has mis-directed himself as the judgement of the Hon’ble Supreme Court does not put fetters on the power of the appellate authority below for entertaining such claim. Therefore, considering the totality of the facts and material placed before us, we deem it proper and in the principle of natural justice to restore this ground to the file of Ld.CIT(A) to decide the issue afresh - Appeal of assessee are allowed for statistical purposes.
Disallowance of subscription and membership expenses - contentions of the assessee are, firstly, the expenditure was incurred for business expediency and secondly, the disallowance is highly excessive - HELD THAT:- We find that the expenditure is related to subscription or membership fee and expenditure incurred for business meetings. It is the contention of the assessee that the facility was provided to senior managerial personnel of the company under the terms of employment for having meetings with senior executives and probable customers. We find merit in this contention of the assessee that such membership is used for furthering social relationship and also develop business communication - disallowance made by the AO is not justified. Hence, same is hereby deleted. This ground of assessee’s appeal is allowed.