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2015 (7) TMI 361 - ITAT PUNE

2015 (7) TMI 361 - ITAT PUNE - TMI - Addition made invoking the provisions of S. 36(1)(iii) r.w.s. 40A(2)(b) - Held that:- In the instant case, there is no question of disallowance of interest on account of interest free advances given to related parties. It is a reverse case wherein the assessee has obtained the loan from related parties by paying exorbitant rate of interest for which the Assessing Officer disallowed the excess interest paid to the related parties by invoking the provisions of .....

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ich cannot be correctly ascertained and since certain additions were made during A.Y. 2006-07 and 2008-09 by the Assessing Officer 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 natu .....

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inion 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 the Respondent : Shri B C Malakar ORDER Per R K Panda, AM. This appeal filed by the assessee is directed against the order dated 26-08-2013 of the CIT(A), Kolhapur relating to As .....

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ovisions of S. 36(1)(iii) & 40A(2)(b) are not applicable to the facts of the case the addition confirmed by CIT(A) be deleted. 2) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition made by the A.O. invoking the provisions of S. 36(1)(iii) r.w.s. 40A(2)(b) of the Act, saying that the assessee-company itself offered the same for taxation. The 'offering to tax' was under certain misconception of law. The addition is not sust .....

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ncome of the year on which tax is already paid which goes to build up the interest free funds. The addition of ₹ 34,10,881/- is unwarranted and it be deleted." 3. The Ld. Counsel for the assessee at the outset submitted that the issue stands decided against the assessee by the decision of the Tribunal in assessee's own case for the immediately preceding assessment year. We find the Tribunal in assessee's own case vide ITA No.849/PN/2013 order dated 11-08-2014 for A.Y. 2009-10 .....

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t. 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 t .....

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d the assessee to justify the reasonableness of such huge interest paid to the Directors. The assessee had given the reasons and thereafter to buy peace of mind had offered the excess interest paid to tax. Therefore, there is no question of any legal misconception which the assessee had foregone by way of concession. It is purely a factual matter. Therefore, we do not find any merit in the grounds raised by the Ld. Counsel for the assessee challenging the disallowance of addition of ₹ 33,3 .....

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as calculated the interest to be paid to the Directors and related parties @15.60% and offered the balance amount for taxation. Therefore, under the facts and circumstances of the case, the various case decisions relied on by the Ld. Counsel for the assessee are not applicable. 6.3 We further find that the assessee in the grounds has mentioned that it has sufficient interest free funds available which are far in excess of the loans advanced to persons covered u/s.40A(2)(b). In the instant case, .....

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d to the related parties covered u/s.40A(2)(b), therefore, the CIT(A) in our opinion was fully justified in upholding the addition made by the Assessing Officer. The grounds raised by the assessee are accordingly dismissed." 4. Facts being similar, therefore, following the decision of the Tribunal 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 .....

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n 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, he .....

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vestment as expenditure attributable to earning of exempt income. 8. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 9. We have considered the rival arguments made by both the sides. We find an identical issue had come up before the Tribunal in assessee's own case for the A.Y. 2009-10. The Tribunal vide ITA No.849/PN/2013 order dated 11-08-2014 has dismissed the grounds raised by the assessee by observing as under: "10. We have considered the rival arguments .....

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ndian Companies which is claimed as exempt u/s 10(34) of the I. T. Act. However, the expenditure incurred regarding the same is negligible and cannot be correctly ascertained". 10.1 We further find similar disallowances were made in the assessment orders passed for A.Yrs. 2006-07 and 2008-09 by the Assessing Officer and nothing was brought to our notice as to the outcome of such disallowance made by the Assessing Officer. The relevant observations of the Assessing Officer at para 4.2 and 4. .....

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quot;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. Regardi .....

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en debited towards exempted income (i.e. dividend) and therefore, I request your honour not to disallow any expenses in this regard." 10.2 Since the assessee itself had admitted that it has incurred certain expenses although the same is negligible which cannot be correctly ascertained and since certain additions were made during A.Y. 2006-07 and 2008-09 by the Assessing Officer u/s.14A and nothing has been brought on record as to the outcome of the same including the quantum, therefore, we .....

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A) on this issue in the preceding assessment year and in absence of any contrary material brought to our notice against the order of the Tribunal, we find no infirmity in the order of the CIT(A). Accordingly, the same is upheld and the ground raised by the assessee is dismissed. 11. Ground of appeal No.5 by the assessee reads as under : "5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the ad-hoc disallowance of ₹ 1,32,400/- made .....

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to the business nexus of the assessee. No telephone call register was maintained to ensure that the entire expenses under this head were incurred for the purpose of business. The AO, therefore, disallowed 10% of the expenses on estimate basis being personal in nature and accordingly made addition of ₹ 1,32,400/- to the total income of the assessee. In appeal the Ld.CIT(A) upheld the action of the AO. 13. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 14. After .....

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