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2015 (7) TMI 980 - ITAT MUMBAI

2015 (7) TMI 980 - ITAT MUMBAI - TMI - Diversion of income by overriding title - payment to expartners or spouses of deceased partners - CIT(A) deleted addition - whether the aforesaid payment is nothing but diversion of income by overriding title? - plea of the assessee was that, the amount was a prior and overriding charge on the receipts of the firm in terms of the partnership deed and the actual income can be arrived at only after reducing the impugned payments from the gross receipts of the .....

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s diverted by overriding title.- Decided against revenue.

Disallowance under section 14A - interest expenditure incurred for earning dividend income from the preference shares - Held that:- he ultimate conclusion of the CIT(A) in directing the Assessing Officer to recompute the disallowance u/s 14A of the Act in accordance with the decision of the Hon’ble High Court in the case of Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ) is hereby affirmed - Decided against assessee. - IT .....

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e Tax Act, 1961, [hereinafter referred to as the Act ] for assessment year 2007-08. 2. In the appeal of the Revenue, the following Ground of Appeal has been raised:- 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A)-3, Mumbai has erred in deleting the addition made by the AO of ₹ 85,37,147/- on account of payment to expartners or spouses of deceased partners without appreciating the fact that the aforesaid payment is nothing but diversion of income by over .....

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er show-caused the assessee as to why such payment be not disallowed, while computing total income for the year under consideration. 4. The plea of the assessee was that, the amount of ₹ 85,37,142/- was a prior and overriding charge on the receipts of the firm in terms of the partnership deed and the actual income can be arrived at only after reducing the impugned payments from the gross receipts of the year. Alternatively, it was canvassed that the expenditure of ₹ 85,37,142/- has b .....

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Court against the Tribunal order for assessment years 1995-96 to 1997-98, which were dismissed by the Hon ble High Court vide its order dated 15.07.2008 for assessment year 1995-96 and by order dated 25.07.2008 for assessment years 1996-97 and 1997-98. 5. The Assessing Officer disagreed with the assessee and disallowed the claim on both grounds. With regard to the orders of the Hon ble High Court for assessment years 1995-96 to 1997-98, it was noted that the Department had filed a Miscellaneous .....

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assessment years 2000-01, 2001-02 and 2003-04 was decided by the Tribunal vide order dated 21.05.2010 in favour of the assessee. The CIT(A) noted that there was no material change in the relevant clause of the partnership deed when compared to year which were before the Tribunal. Therefore, following the precedents, he allowed the claim of the assessee that the impugned payment to retired partners or spouses of the deceased partners under the terms of the partnership deed is diverted by overridi .....

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is concerned, the Grounds of appeal raised read as under:- 1. The learned Commissioner (Appeals) erred in directing the Assessing Officer to disallow under section 14A, interest expenditure incurred for earning dividend income from the preference shares. 2. The learned Commissioner (Appeals) erred in directing the Assessing Officer to disallow under section 14A, expenses incurred for earning dividend income from the preference shares. 3. The learned Commissioner (Appeals) ought to have appreciat .....

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to restrict disallowance under section 14A for expenses incurred for earning dividend income in accordance with Rule 8D. Interest expenses for earning share of profit 6. The learned Commissioner (Appeals) erred in directing the Assessing Officer to disallow under section l4A, interest expenditure incurred for earning share of profit from the other partnership firms. 7. The learned Commissioner (Appeals) ought to have appreciated that no disallowance under section 14A read with Rule 8D was made b .....

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hip firms would not be in the nature of exempt income, hence profit earned from other partnership firms is not required to be considered while calculating disallowance under section 14A. 10. Without prejudice to the above, the learned Commissioner (Appeals) ought to have directed the Assessing Officer to restrict disallowance under section 14A for interest expenditure for earning share of profit computed in accordance with Rule 80. Expenses for earning share of profit 11. The learned Commissione .....

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n 14A. 13. Without prejudice to the above, the learned Commissioner (Appeals) ought to have directed the Assessing Officer to restrict disallowance under section 14A for expenses computed in accordance with Rule 8D. Payment under Clause 22 of the Partnership Deed 14. The learned Commissioner (Appeals) erred in not deciding the following grounds in the appeal: "3. Without prejudice to the above, the learned Joint Commissioner ought to have allowed deduction for the amount of ₹ 85,3 7,1 .....

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s challenged the addition of ₹ 4,65,023/- made by the Assessing Officer by invoking section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 (in short the Rules ). The assessee firm was found to have earned exempt income in the form of share of profit from other partnership firms and dividend on preference shares. The assessee firm claimed before the Assessing Officer that no expenditure was incurred for earning such income and that the investment was not out of borrowed fund .....

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