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2022 (10) TMI 162 - AT - Income TaxDisallowance of business associate expenses - Appellant is engaged in share/broking business wherein it is normal business practice to have sub-brokers/business associates - HELD THAT:- The findings returned by the AO/CIT(A) are without any factual basis and are on based conjecture/surmise. The Appellant has claimed deduction for business associate expenses in the preceding assessment years, however, no disallowance has been made in respect of the same. It is admitted position there has been no change in the facts and circumstances as compared to preceding assessment years. Thus, in view of the aforesaid, we hold that the Appellant is entitled to claim deduction for business associate expenses having substantiated his claim by filing relevant documents/details before the authorities below. Accordingly, we reverse the decision of CIT(A) and delete the disallowance made by Assessing Officer. Ground No. 1 raised by the Appellant is allowed. Ad-hoc disallowance of certain expenses - Appellant had claimed deduction for Computer Expenses, General Charges, Motor Car Expenses, Staff Welfare Expenses, Printing & Stationery Expenses, Telephone Expenses, and Travelling & Conveyance Expenses - AO made ad-hoc disallowance at the rate of 25% which was reduced to 15% by the CIT(A) - HELD THAT:- We have considered the rival contentions and perused the material on record. Some ledgers relating to travelling expenses have been placed before us and the same are bulky. Even the tax auditor has expressed opinion that the possibility of some expenses being of personal nature being debited to the Profit & Loss Account cannot be ruled out. We note that in the immediately preceding assessment year 2010-11, the assessing officer had, in similar facts and circumstances, adopted rate of 10% for making the disallowance. Accordingly, keeping in view the facts and circumstances of the present case we restrict the disallowance to 10% of the expenditure. - Decided partly in favour of assessee. Disallowance made u/s 14A - investment made in foreign subsidiary - HELD THAT:- We find merit in the contention advanced by the Learned Authorised Representative for Appellant that investment made in foreign subsidiary should be excluded while computing disallowance under Section 14A read with Rule 8D of the Rules since the dividend income of foreign subsidiaries is taxable in India and therefore, the Assessing Officer is directed accordingly. Assessing Officer is also directed to verify and consider only the investments yielding exempt income during the relevant previous year while computing disallowance under Section 14A read of the Act with Rule 8D of the Rules as held by the special bench of the Tribunal in the case of ACIT Vs. Vireet Investment (P.) Ltd[2017 (6) TMI 1124 - ITAT DELHI]. Disallowance of interest expenditure - HELD THAT:- Appellant had sufficient owned/interest free funds to make deposits as well as interest bearing funds, and therefore, as per the judgment of the Hon”ble Bombay High Court in the case of Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] it can be presumed that the interest free deposits were made out of owned/interest free funds and therefore, disallowance under Section 36(1)(iii) of the Act was not warranted. As regards, the findings returned by the Tribunal in the case of Deena Asit Mehta [2018 (2) TMI 1987 - ITAT MUMBAI] are concerned; we note that the same were given after examining the leave & license transaction from the perspective of the licensor and not from the perspective of licensee. In view of the aforesaid, we reverse the decision of CIT(A) on this issue and delete the addition made by the Assessing Officer. Ground raised by the Appellant is allowed.
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