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2014 (2) TMI 671 - ITAT MUMBAIDisallowance u/s 14A of the Act r.w. Rule 8D of the Rules – Exemption claimed u/s 10(34) of the Act - Dividend income earned – Held that:- The decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D cannot be invoked for assessment year 2006-07 - Rule 8D cannot be invoked for this assessment year and only a reasonable amount can be considered for disallowance for earning exempt income. As seen from the reserves and profits assessee has more funds than investments, so disallowance of interest without establishing nexus does not arise. Considering that assessee has earned dividend income of Rs.12.06 crores, 1% of the amount can be considered as reasonable – thus, 1% of the dividend earned can be considered as reasonable amount for disallowance under section 14A on the given facts – Decided partly in favour of Assessee. Disallowance of deduction u/s 40(a)(ib) of the Act - STT paid on behalf of assessee – Held that:- The decision in IL & FS Investsmart Ltd. Versus Addl. CIT & DCIT[2014 (2) TMI 254 - ITAT MUMBAI] followed – there was some force in the contention of the Counsel for the assessee so far as the treatment of brokerage inclusive of STT is concerned – thus, the matter is remitted back to the AO for fresh adjudication. Disallowance of bad debts – Held that:- The decision in CIT Vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT] followed - , in the business of share broking, the amount payable by the clients are also considered as 'amount taken into account' – the AO is directed to allow the amount as bad debts - Decided in favour of Assessee. Entrance fee paid to club – Held that:- The decision in CIT vs. Samtel Color Ltd [2009 (1) TMI 26 - DELHI HIGH COURT] followed - admission fee paid towards corporate membership was an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it facilitated the smooth and efficient running of a business and did not add to the profit earning apparatus of a business enterprise - thus, the AO is directed to allow the amount as expenditure u/s 37(1) - Decided in favour of Assessee. Amount paid to stock exchange – Disallowance of Penalty - Held that:- The decision in IL & FS Investsmart Ltd. Versus Addl. CIT & DCIT[2014 (2) TMI 254 - ITAT MUMBAI] followed - The penalty was on account of irregularities committed by the assessee's clients - the capital market regulations of the stock exchanges were in the nature of indoor management governing relations between the member and the stock exchange and not an offence punishable by the statute - the CIT(A) has rightly deleted the addition – the order of the CIT(A) upheld – Decided against Revenue. Calculation of Interest u/s 234B of the Act – Held that:- The levy of interest u/s. 234B is mandatory as Decided in CIT vs Anjum M H Ghaswala [2001 (10) TMI 4 - SUPREME Court] and is to be calculated on the assessed income - levy of interest u/s 234B is compensatory in nature and is chargeable not-withstanding the fact that default is bonafide - No discretion can be exercised in matter of levy of interest u/s 234B – thus, exclusion of the amount as considered by the CIT(A) is not according to the provisions of law – the order of the CIT(A) modified and AO is directed to levy interest u/s. 234B, if applicable – Decided partly in favour of Revenue.
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