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2017 (3) TMI 1180 - AT - Income TaxAddition u/s 14A - Held that:- The assessee company had share capital and reserves of ₹ 10.31 crores as against investment of ₹ 20,00,000/- at the year end. The CIT(A) has held that if the assessee’s capital, reserves, surplus and current account deposits are higher than cost of tax free investments, it has be presumed that the said investment is made by the assessee out of interest free funds. The CIT further held that if the funds are available both interest free and interest bearing then a presumption would arise that the investments made out of interest free funds generated or available with the company and if the interest free funds are sufficient to meet the investment then there is no need of disallowing any interest. We find that before A.O. and CIT(A), the Assessing Officer has not given any working of expenditure in relation to earning of such exempt income with any supporting evidences. Therefore, the A.O. has applied of Rule 8D of the Income Tax Act and worked out the expenditure for earning the exempt income i.e. ₹ 23,685/-. We find that CIT(A) has restricted disallowance upto ₹ 10,669/-. In the result, the appeal of the assessee is dismissed. Addition on account of bogus purchase - GP addition - Held that:- Considering the decision of the Hon’ble Mumbai Bench of ITAT in the case of Madukant B. Gandhi (2010 (2) TMI 1211 - ITAT MUMBAI ) and the approx. average GP of 5% declared by the appellant, it is held that the net addition sustained in this case would be 12.5% [as per Simit Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) – 5% - 7.5%.
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