TMI Blog2015 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.14A and nothing has been brought on record as to the outcome of the same including the quantum, therefore, we do not find any infirmity in the order of the CIT(A) upholding the disallowance made u/s.14A r.w. Rule 8D for the impugned assessment year. - Decided against assessee. Disallowance of 10% of the expenses on estimate basis being personal in nature - Held that:- There is no dispute to the fact that certain bills and vouchers were supported by only self-made vouchers and were not amenable for verification for which the Assessing Officer made adhoc disallowances. We find similar disallowances were made in the preceding year and the assessee has not objected to the same. However, none of the parties has brought to our notice regarding the amount of disallowance. Considering the totality of the facts of the case, we are of the considered opinion that the disallowance at 10% on adhoc basis appears to be on the higher side. We therefore direct to restrict such disallowance to 5% of the expenses - Decided partly in favour of assessee. - ITA No.1948/PN/2013 - - - Dated:- 30-4-2015 - R K Panda, AM And Vikas Awasthy, JM,JJ. For the Appellant : Shri M K Kulkarni For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer disallowed an amount of ₹ 33,37,059/- being excess interest paid to the Directors, Members and related parties by invoking the provisions of section 40A(2)(b) of the I.T. Act. While doing so, he had also considered the offer of the assessee for addition of ₹ 33,37,059/- for taxation. The assessee after giving in writing to the Assessing Officer regarding the reasons for payment of excess interest @21% to the specified persons has categorically stated that to buy peace of mind he wants to offer the interest paid over and above the bank rate for taxation. Therefore, having offered the same to tax in writing and by giving the individual details for calculating the disallowance the assessee is now agitating on the ground that there was misconception of law. 6.1 In our opinion, it is not a legal issue and is purely a factual issue. The Assessing Officer had clearly brought on record the rate of interest paid to outside creditors at 9%, to the banks at 14.75% and 21% paid to the related parties. Since there was huge difference between the rate of interest paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal the above grounds by the assessee are dismissed. 5. Ground of appeal No.4 by the assessee reads as under: 4) On the facts and circumstances of the case and in law the Ld. CIT(A) 1962. There is no finding to the effect that any expenditure was incurred for earning the exempt dividend income. The assessee company had sufficient non-interest bearing funds to make the investment on which the tax exempt income has been earned. In view of this no disallowance is called for u/s 14A of the Act r.w.r. 8D of I. T. Rules, 1962. The addition be deleted. 6. After hearing both the sides, we find the assessee company has shown dividend income of ₹ 2,25,517/- on account of investment in shares in Indian Companies and claimed the same as exempt u/s.10(34) of the I.T. Act. No expenditure has been debited for earning this income before claiming the exemption. On being questioned by the AO it was submitted that no expenditure has been incurred for earning this income. Following the order for the preceding assessment year the AO disallowed an amount of ₹ 93,288/- u/s.14A r.w. Rule 8D of the I.T .Act. 7. In appeal the Ld.CIT(A) upheld the action of the AO. While doing so, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 142(1) of the Act dt. 30/08/2011, the assessee company was asked to explain as under:- Please refer to the assessment order passed for A. Y, 2006-07 and 2008-09 by the AOs on 05/12/2008 and 23/12/2010. Please state as to why identical view should not be taken for disallowance of interest on payments s towards share application money and also disallowance of proportionate expenses for exempted income (i.e. Dividend) . 4.3 In response to the above, the assessee company , vide submission dt. 12/09/2011, in Sr. No. 11, the assessee company replied as under: 11. Regarding the disallowance of interest on share application money, I would like to state before your honour that, the share application. money paid for IPO's of various companies remain with those companies for a very short period, and dividend if any received on the shares allotted from such companies is credited in the books of accounts. I, therefore request your honour, not to disallow of interest on share application money. I also bring to your honors kind notice that, no heavy expenses have been debited towards exempted income (i.e. dividend) and therefore, I request your honour not to disallow an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing both the sides, we find an identical issue had come up before the Tribunal in assessee's own case in the immediately preceding assessment year. The Tribunal vide ITA No.849/PN/2013 order dated 11-08-2014 has restricted such disallowance to 5% by observing as under : 12. We have considered the rival arguments made by both the sides. There is no dispute to the fact that certain bills and vouchers were supported by only self-made vouchers and were not amenable for verification for which the Assessing Officer made adhoc disallowances. We find similar disallowances were made in the preceding year and the assessee has not objected to the same. However, none of the parties has brought to our notice regarding the amount of disallowance. Considering the totality of the facts of the case, we are of the considered opinion that the disallowance at 10% on adhoc basis appears to be on the higher side. We therefore direct to restrict such disallowance to 5% of the expenses. We hold and direct accordingly. The ground raised by the assessee is accordingly partly allowed. 15. Following the same reasonings we direct the AO to restrict such disallowance to 5% of the expenses claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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