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DCIT, Circle 30 (1) , New Delhi and others Versus R.P. Electronics, New Delhi and others

2015 (7) TMI 763 - ITAT DELHI

Disallowance u/s 14A r.w.r. 8D - CIT(A) restricted the addition to ₹ 1 lakh - Held that:- We are in agreement with the conclusion of the CIT(A) that as per decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) the Rule 8D of the Rules is applicable from A.Y. 2008-09 onwards and the AO was not justified in invoking Rule 8D for making impugned disallowance. We are also in agreement with the conclusion of .....

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erest paid by the assessee we note that the interest paid to the partners on their capital is ₹ 88,94,929/- and interest paid towards security deposits overdraft facility loan on vehicles late payments and bank charges comes to ₹ 1,01,37,215/- and after deducting interest received by the assessee on fixed deposit of ₹ 21,03,300/- the net interest debited in the profit and loss account comes to ₹ 80,33,915/- and these figures have not been disputed by the ld. DR. In this s .....

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nsidered view that the invocation of Rule 8D of the Rules by the AO was an incorrect action which was rightly corrected by the CIT(A) restricting the disallowance u/s 14A of the Act to the extent of ₹ 1 lakh. We are unable to see any infirmity or any other valid reason to interfere with the impugned order and we upheld the same in toto. - Decided against revenue and assessee. - I.T.A .No. 2069/Del/2012,Cross Objection Nos. 354/Del/2012 - Dated:- 7-7-2015 - Shri J.S. Reddy and Shri C.M. Gar .....

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Delhi has erred in deleting the addition of ₹ 14,35,233/- out of total addition of ₹ 15,35,233/- made by AO u/s 14A read with Rule 8D of I.T. Rules. 3. Cross objections raised by the assessee in CO No. 354/Del/2012 read as under: 1. That the CIT(Appeal) XXV New Delhi erred on facts and in law in confirming the disallowance of interest expenditure amounting to ₹ 1,00,000/- u/s 14A Income-tax Act, 1961 (the Act), alleged to have been incurred for earning tax free dividend income. .....

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1961 (for short the Act) of ₹ 20,83,618/- on dividend income. The AO vide questionnaire dated 17/10/2008 asked the assessee to show cause why not proportionate expenses be disallowed u/s 14A of the Act for earning dividend income being exempted income. After considering replies of the assessee dated 11/12/2008 and 17/12/2008 the AO invoked Rule 8D and calculated disallowance u/s 14A of the Act to ₹ 15,35,233/- and added the same to the taxable income of the assessee. The aggrieved as .....

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f both the sides and carefully perused the relevant material placed on record, interalia, the assessment order, impugned order and written submissions and case laws relied by both the sides. 6. Undisputedly Rule 8D of the I.T. Rules, 1962 (for short the Rules ) is not applicable in the present case of the assessee as the cases related to A.Y. 2006-07 and the same is applicable from A.Y. 2008-09 onwards. The authorities below have not disputed that the assessee declared tax free dividend income o .....

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m the order of the AO and the submissions of the assessee is that the assessee is a partnership firm and is a distributor of dry cell batteries. The assessee has received the dividend income of ₹ 20,83,618/- and claimed the same as exempt u/s 10(34). The total investment of the assessee in the stock/mutual fund is ₹ 1,40,04,084/-. The assessee has declared the interest income of ₹ 21,03,300/- and has claimed the net interest payment of ₹ 80,33,914/- and the assessee has a .....

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le 8D has been notified with effect from 24/03/2008 and the same is as applicable only with effect from AY 2008-09 and the assessee also relied on the case of Hon ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. Vs. DCIT (2010) 328, ITR 0081 (Bom.) dated 12/08/2010, which supports the case of the assessee. The assessee also argued that the AO has computed the disallowance without considering the facts that the assessee has the partners capital of ₹ 15,37,14,803/- which h .....

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ment is being disallowed by the AO by invoking the provisions of Rule 8D. The assessee also argued that since the provisions of Rule 8D is applicable with effect from AY 2008- 09 only and the same is not applicable in the case of the assessee as the case of the assessee relates to AY 2006-07, it was argued that at the best a nominal lump sum disallowance of the interest may be made. 3.3 I have considered the addition of the AO and the submissions of the assessee and I find merit in the submissio .....

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yment attributable to the earning of the exempted dividend income of ₹ 20,83,618/- and the case of Godrej and Boyce Mfg. Co. Ltd. Vs. DCIT (supra) relied on by the assessee also very much supports the case of disallowance made by the AO which held as under: that the provisions of Rule 8D of the rules which have been notified w.e.f. 24/03/2008 would apply with effect from AY 2008-09. Even prior to A.Y. 2008-09 when Rule 8D was not applicable the AO had to enforce the provisions of subsectio .....

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me part of the expenses would have been incurred and which is even otherwise disallowable u/s 14A and accordingly, it will be in the interest of justice to make a nominal estimated disallowance of ₹ 1,00,000/- and as such the disallowance of ₹ 1,00,000/- is confirmed and the balance amount of ₹ 14,35,233/- (Rs. 15,35,233/- (-) ₹ 1,00,000/-) is deleted. 7. In view of above, at the outset, we are in agreement with the conclusion of the CIT(A) that as per decision of Hon ble .....

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