TMI Blog2011 (4) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... is noted that the assessee has paid ₹ 5,000 towards donation for temple construction but no proof of exemption, under section 80G, was filed at any stage of proceedings - Against assessee. Deduction of interest on borrowed fund - Held that:- Since, the assessee is quite justified in contending that no part of the interest paid on borrowings could be treated as having been used for the purposes of investments, and, accordingly, no disallowance u/s 14A can be made in respect of the same. The disallowance in respect of interest is deleted - Having held so, however, a reasonable portion of management expenses can indeed be disallowed under section 14A, and for that limited purpose and for fresh adjudication in the light of principles laid down in the case of Godrej & Boyce Mfg. Co. Ltd. v Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT], the matter is restored to the file of the Assessing Officer. Indexation benefit denied - loss on sale of preference shares - Held that:- Second proviso to section 48 provides that, "where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be disallowed. In response to Assessing Officer s aforesaid requisition, it was submitted by the assessee that, out of the provision of Rs. 1,05,008 in respect of bonus, an amount of Rs. 75,512 was paid before 31-10-2005 i.e., before the due date of filing of return of income. The Assessing Officer however rejected the claim by observing that "as per tax audit report, the assessee has not paid bonus amount of Rs. 1,05,008, either during the previous year or on the date of the tax audit report, nor has furnished any evidence for payment of bonus of Rs. 75,512 before 31-10-2005 along with the return of income". It was also observed that the assessee has not furnished any evidence of such payment before 31-10-2005. It was in this backdrop that the Assessing Officer rejected the claim of the assessee. The assessee carried the matter in appeal before the CIT(A) but without any success. The CIT(A) noted that, in terms of the requirements of section 43 B, not only that the amount has to be paid before the due date of filing the Income-tax return but also the evidence of such payment has to be furnished along with the return of income. In the present case, even though payment of bonu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 5. Ground No. 1 is thus allowed. 6. Ground No. 2 relates to disallowance of Rs. 5,000 towards payment of donation. 7. Having heard the rival contentions and having perused the material on record, we do not find any infirmity in the order of the CIT(A) to interfere. It is noted that the assessee has paid Rs. 5,000 towards donation for temple construction but no proof of exemption, under section 80G, was filed at any stage of proceedings. In view of this, we uphold the order of the CIT(A). This ground is dismissed. 8. In the third and fourth ground of appeal, the assessee has raised the following grievances: "3. The ld. CIT(A) erred in disallowing the claim of deduction of interest of Rs. 2,92,593 and while doing so he amongst other failed to appreciate that: (a) in the appellate order in appellants own case for assessment year 2001-02, the claim of deduction of interest was allowed as deduction. (b) provisions of section 14A was not applicable to the facts of appellants case insofar as there was no income which was exempt under the provisions of the Act. 4. The ld. CIT(A) erred in disallowing lump sum amount of Rs. 1,00,000 without any basis." 9. In the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments. In these circumstances, the assessee is quite justified in contending that no part of the interest paid on borrowings could be treated as having been used for the purposes of investments, and, accordingly, no disallowance under section 14A can be made in respect of the same. The disallowance in respect of interest is deleted. Having held so, however, a reasonable portion of management expenses can indeed be disallowed under section 14A, and for that limited purpose and for fresh adjudication in the light of principles laid down by Hon ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. v Dy. CIT [2010] 328 ITR 81/194 Taxman 203 (Bom.), the matter is restored to the file of the Assessing Officer. 11. Ground No. 3 is thus allowed and ground No. 4 is thus allowed for statistical purposes in the terms indicated above. 12. Ground No. 5 reads as under :-- The ld CIT(A) erred in not allowing loss of Rs. 21,382 on sale of preference shares by denying indexation benefit notwithstanding the fact that 3rd proviso to section 48 denies indexation benefit only to bonds debentures. 13. As far as this grievance of the assessee is concerned, it is suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that and delete this adjustment as well. 18. Ground No. 6 is thus allowed. 19. In ground No. 7, the assessee has raised that the learned Commissioner of Income-tax (Appeals) erred in not reducing Rs. 25,34,023 from the net profit as per profit and loss account as per clause (iii) to Explanation 1 to section 115JB. 20. As far as this grievance of the assessee is concerned, it is sufficient to take note of the fact that in the impugned order the CIT(A) has rejected all the contentions of the assessee rather summarily by treating the issue as covered against the assessee by ruling given by the Authority for Advance Ruling in the case of Rashtriya Ispat Nigam In re [2006] 285 ITR 1/155 Taxman 60 (AAR New Delhi). Learned counsel does not dispute that the issue before the Hon ble Authority for Advance Ruling was the same as in this case, but he points out that it is only elementary that advance rulings, despite their persuasive value and respect, donot bind a judicial authority. It is also pointed out that certain aspects of the matter, which are crucial to determination of legal issues, did not come up for consideration before Hon ble AAR. Our attention is also invited to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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