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TMI Blog2014 (7) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 1,27,941/- made by the AO u/s. 14A of the I.T. Act, 1961 being expenditure incurred for earning tax free dividend income of Rs. 1,27,941/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 30,89,952/- on account of lease rentals paid by assessee company for assets taken on lease. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the estimated addition of Rs. 10 lakhs out of total expenditure incurred without appreciating the fact that assessee company has not submitted evidence on expenses debited to P&L Account and consequently it was binding upon the AO to estimate the same. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to grant credit for TDS amounting to Rs. 2,00,87,433/- against the provisions of Sec. 199 of the I.T. Act, 1961." 3. The assessee is an advertising agency who filed its return of income on 29,10.2004 declaring taxable income at Rs. 15,21,70,400/-. The return was selected for scrutiny assessment. Accordingly, statutory no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Sec. 14A, there has to be a proximate cause for disallowance, which is its relationship with the tax exempt income. 7.2. The Hon'ble Bombay High Court in the case of Reliance Industries Ltd 339 ITR 632 has confirmed the findings of the Tribunal which held that "there is no fact of assessee having incurred any expenditure for the purpose of earning the dividend income. The disallowance is misconceived and the same is deleted. 7.3. The Hon'ble High Court of Punjab & Haryana in the case of CIT Vs Hero Cycles Ltd 323 ITR 518 has held that "disallowance u/s. 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance u/s. 14A cannot stand. 7.4. In the instant case, we find that the AO has not brought anything on record which could suggest that certain expenditures have been incurred for earning the exempt income, directly or indirectly. However, following the ratio of the Hon'ble Bombay High Court in the case of Godrej & Boyce (supra) by which a reasonable disallowance has to be made , in our considered view, disallowance of 2% of the dividend income would meet the ends of justice. We, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated what has been submitted before the lower authorities. 15. The assessee's accounts are audited. The requisite details were filed before the AO. The AO has not pointed out any specific expenditure which according to him was not properly supported by bills/ vouchers nor there is any specific finding that any expenditure have been incurred not for the purpose of business. It is not in dispute that the addition has been made on adhoc basis. Considering these facts in totality, we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 3 is accordingly dismissed. 16. Ground No. 4 relates to the direction given to the AO by the Ld. CIT(A) to grant credit for TDS amounting to Rs. 2,00,87,433/-. 16.1. During the course of the assessment proceedings, the assessee was asked to submit the reconciliation of amounts credited to its P&L account and the amounts received as per TDS certificates for which TDS credit have been claimed. On receiving no such details from the assessee, the AO denied the claim of credit for TDS. 17. The Ld. CIT(A) has considered this grievance qua ground No. 8 before him. It was submitted before the Ld. CIT(A) that during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to upholding of the adhoc disallowance of Rs. 5 lakhs out of entertainment expenditure. 23.1. A perusal of the assessment order shows that the AO has disallowed a sum of Rs. 5 lakhs based on the findings given in the order for A.Y. 2003-04. We find that the Tribunal in A.Y 2003-04 in ITA Nos. 6655 & 6656/M/06 has considered a similar issued vide para-7 of its order and at para-13 relying on the decision of the Bombay High Court in the case of CIT Vs Shah Nangi Nagsi 116 ITR 292 deleted the adhoc disallowance made by the AO. 24. In the case in hand, as mentioned elsewhere, the AO has made the disallowance based on the findings of A.Y 2003-04 which the Tribunal has deleted. Drawing support from the decision of the co ordinate Bench, we direct the AO to delete the disallowance of Rs. 5 lakhs. C.O. No. 3 is accordingly allowed. 25. Ground No. 4 becomes otiose as per our finding for ground No. 3 in Revenue's appeal. 26. The assessee has not pressed Ground No. 5. Therefore it is dismissed as not pressed. 27. C.O. No. 6 relates to levy of interest u/s. 234B and 234D. Charging of interest is mandatory though consequential. We direct the AO to levy interest as per the provisions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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