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PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus INDIA GELTINE AND CHEMICALS LTD

2015 (5) TMI 276 - GUJARAT HIGH COURT

Disallowance of the interest expenses under Section 14A r.w.r 8D - assessee soumoto disallowed the amount on adhoc basis - ITAT allowed claim - Held that:- We are in complete agreement with the view taken by the learned Tribunal and the reasons given by the learned Tribunal while deleting the disallowance of interest expenses under Section 14A of the Act as Assessing Officer as well as the Commissioner of Income Tax (Appeals) could not pinpoint any error in the computation of disallowance made b .....

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reight - ITAT deleting disallowance - Held that:- It is required to be noted that as per section 172 of the Act, payment made to the nonresident shipping company would not be covered in Sections 194C or 194 of the Act. At this stage it is required to be noted that it is not in dispute that the amount in question was infact paid to the nonresident shipping company. Under the circumstances, the learned Tribunal has rightly deleted the disallowance made by the AO under Section 40(a)(ia) of the Act. .....

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s common judgment and order. [2.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 10.10.2014 passed by the learned Income Tax Appellate Tribunal, B Bench, Ahmedabad (hereinafter referred to as Tribunal ) in ITA No.611/Ahd/2013 for Assessment Year 200910 by which the learned Tribunal has partly allowed the said appeal by deleting the disallowance of the interest expenses under Section 14A of the Income Tax Act, 1961 (hereinafter referred to as Act ) read with Rule 8 .....

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10.10.2014 passed by the learned Income Tax Appellate Tribunal, B Bench, Ahmedabad (hereinafter referred to as Tribunal ) in ITA No.781/Ahd/2013 for Assessment Year 200910 by which the learned Tribunal has dismissed the said appeal preferred by the Revenue confirming the deletion of disallowance of interest expenses under Section 14A of the Act read with Rule 8D of the Rules made by the learned CIT(A) and deleting the disallowance made by the AO under Section 40(a)(ia) of the Act for nondeducti .....

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t of disallowance made u/s 40(a)(ia) of the Income Tax Act on account of non deduction of TDS on overseas freight when assessee has not submitted details of filing of return u/s 172 of the Act by non resident ship liner? [3.0] Facts leading to the present Tax Appeals in nutshell are as under: [3.1] That the assessee filed return of income for AY 200910 declaring total income of ₹ 14,19,79,940/. The return of income was processed under Section 143(1) of the Act. Subsequently, the case was s .....

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no interest payment is made by the assessee and therefore, the provision of Section 14A of the Act is applicable and since the assessee has not offered disallowance worked out under Section 14A of the Act, a show cause notice was issued and served upon the assessee and the assessee was called upon to show cause as to why the disallowance under Section 14A of the Act should not be made. In response to the said showcause notice the assessee submitted its reply and explanation. Having not satisfie .....

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also disallowed an amount of ₹ 1,02,43,720/under Section 40(a)(ia) of the Act for nondeduction of the TDS on overseas freight. [3.4] Feeling aggrieved and dissatisfied with the order of assessment passed by the AO of disallowance of the interest expenses under Section 14A of the Act read with Rule 8D of the Rules and also the disallowance made by the AO under section 40(a)(ia) of the Act for nonproduction of the TDS on overseas freight, the assessee preferred appeal before the learned CIT( .....

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under section 40(a)(ia) of the Act for nondeduction of TDS on overseas freight. [3.5] Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), both the assessee as well as the Revenue preferred Tax Appeal before the learned Tribunal. The assessee preferred appeal being ITA No.611/Ahd/2013 challenging the order passed by the learned CIT(A) insofar as confirming the disallowance of administration and calculation charges of ₹ 6,22,228/under Section 14A of the Act. The .....

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.611/Ahd/2013 and has deleted the disallowance made by the AO under Section 14A of the Act in its entirety i.e. the entire amount of ₹ 12,06,934/disallowed by the AO under Section 14A of the Act and consequently dismissed the appeal preferred by the Revenue insofar as challenging the deletion of disallowance made by the learned CIT(A) and also confirmed the order passed by the learned CIT(A) in deleting the disallowance made under section 40(a)(ia) for nondeduction of TDS on overseas freig .....

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arned Tribunal has not properly appreciated the fact that the dispute with respect to the AY 200910 and therefore, Rule 8D of the Rules which had come into force with effect from March 2008 would be applicable. It is submitted that it is neither the learned CIT(A) nor the learned Tribunal which disputed that there were mix kind of expenses and therefore, in that view of the matter Rule 8D would be applicable and therefore, the entire expenditure was required to be disallowed under section 14A of .....

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the learned Tribunal has materially erred in confirming the order passed by the learned CIT(A) deleting the disallowance made by the AO under Section 40(a)(ia) of the Act. It is submitted that while deleting such disallowance the learned Tribunal has not properly appreciated the provisions of the Act more particularly section 172 of the Act. It is submitted that admittedly there was no return filed by the recipient as required under Section 172 of the Act and therefore, section 172 of the Act w .....

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ssessment order as well as the order passed by the learned CIT(A) as well as the impugned judgment and order passed by the learned Tribunal. [5.1] Now, so far as the deletion of disallowance of interest expenses under Section 14A of the Act by the learned Tribunal / CIT(A) is concerned, it is required to be noted that the AO made the disallowance under Section 14A of the Act on the ground that the assessee was not able to justify that the investments made in the shares and mutual funds amounting .....

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the Act. 6. We have heard the rival submissions and perused the orders of lower authorities and material available on record. The undisputed facts of the case are that the Assessing Officer observed that the assessee has made investment of ₹ 21,14,07,850/and the assessee has paid interest on borrowed funds of ₹ 40,10,861/. He also observed that the assessee has not made disallowance of interest expenditure according to section 14A read with Rule 8D of the Act. He therefore computed t .....

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supra) and the decision of Hon ble Mumbai High Court in the case of Reliance Utility & Power Ltd. (supra) where it was held that if the interest free funds of the assessee were sufficient for making investments, no disallowance of interest expenditure was called for. The Commissioner of Income Tax (Appeals) held that the finding of the Assessing Officer was not correct that the assessee has not charged any interest free loan to associate concerns. He held that the assessee in fact earned int .....

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Commissioner of Income Tax (Appeals). He could not bring any material on record to show that the assessee could not have advanced interest free loans or loans at lower rate of interest to the sister concerns out of its interest free funds available with it. Therefore, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground no.1 of appeal of the Revenue is dismissed. 8. Further, the Assessing Officer also made disallowance of ₹ 8,22,22 .....

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itted that the assessee has earned divided income of ₹ 12,200/as will be evidenced from the statement of accounts of the assessee at pave 26 of the paper book for which disallowance of ₹ 6,22,228/cannot be made. 9. We find that the Assessing Officer as well as the Commissioner of Income Tax (Appeals) could not pinpoint any error in the computation of disallowance made by the assessee of ₹ 2,00,000/in earning tax free divided income. In the circumstances, in our considered opini .....

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eement with the view taken by the learned Tribunal and the reasons given by the learned Tribunal while deleting the disallowance of interest expenses under Section 14A of the Act. [5.2] Now, so far as the contention on behalf of the appellant with respect to applicability of Rule 8D of the Rules with effect from 31.03.2006 is concerned, there cannot be any dispute about the same. However, it is required to be noted that the AO made the disallowance under Section 14A of the Act solely on the grou .....

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