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2018 (2) TMI 498

Head Note / Extract:
Addition u/s 14A - Held that:- No disallowance out of interest expenditure is called for when own funds available with the assessee exceeds value of investment. The learned CIT(A) has further observed that the disallowance as per Rule 8D(2)(ii) works out to ₹ 1,86,773/-, while the assessee itself has disallowed a sum of ₹ 5,90,507/-. It is also pertinent to note that the actual amount of exempt income earned by the assessee was lower than the amount disallowed by the assessee u/s 14A of the Act. Hence, the decision rendered by the Coordinate Bench in the case of Morgan Stanly Co. Pvt. Ltd. (2018 (2) TMI 428 - ITAT MUMBAI) squarely applies to the facts of the present case. In view of the forgoing discussions, we are of the view that the order passed by the learned CIT(A) on this issue does not call for any interference.

Disallowance made u/s. 40(a)(ia) - reimbursed amounts towards “advertisement and general expenses” - Held that:- CIT(A) correctly deleted the disallowance made by the AO u/s 40(a)(ia). Hon'ble Kolkata High Court in the case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT]

Addition made for computing profit u/s. 115JB in respect of expenditure relatable to exempt income - Held that:- Revenue by Hon'ble Bombay High Court in the case of Bangalore Finance and Investments Pvt. Ltd. (2015 (2) TMI 1263 - BOMBAY HIGH COURT). AO was not justified in adopting the disallowance made by him u/s. 14A of the Act for the purpose of computing book profit under section 115JB of the Act. Hence, the learned CIT(A) was justified in deleting the addition so made by the Assessing Officer.

Rejection of claim for deduction of Service tax liability - Held that:- There appears to be no dispute with regard to the fact that the “input tax credit” relatable to exempt services are not eligible for input tax credit, since the AO himself has observed so in the assessment order. In the instant case, the assessee has provided both taxable and exempt services. Since the “input tax credit” relatable to exempted services are not eligible for input credit, the same has been charged to the Profit and Loss account. We have observed earlier that the service tax paid by the assessee is otherwise eligible for deduction. Hence the input tax credit relatable to exempted services is also eligible for deduction, since it cannot be availed as credit by the assessee.

We agree with the submission of Ld A.R that the method of accounting Service tax liability, i.e., exclusive method or inclusive method does not have revenue implications.

We notice that the tax authorities have taken adverse view against the assessee without verifying the relevant documents, even though they were furnished before them. Since there is no dispute with regard to the fact that the input tax credit relatable to the exempted services cannot be availed by the assessee, we are of the view that the assessee has rightly claimed the same as deductible expenditure. Accordingly we set aside the orders passed by the Ld CIT(A) on this issue in both the years under consideration and direct the AO to allow them as deduction. - Decided in favour of assessee


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