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2015 (8) TMI 211 - ITAT MUMBAI

2015 (8) TMI 211 - ITAT MUMBAI - TMI - Disallowance as per section 14A r.w.Rule 8D(2)(iii) - Disallowance of administrative expenses - the entire administrative expenses was incured by the assessee for the purpose of investment in shares - Held that:- The Assessing Officer while making the disallowance u/s 14A worked out the disallowance under Rule 8D(2)(iii) at ₹ 20,86,230/- which shows that the working under the provisions of Rule 8D negates the actual total expenditure debited by the as .....

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e nexus with the activity of investment or earning the exempt income. Thus the disallowance u/s 14A can be made only to the extent of allocation of these expenses which has direct or proximate nexus with earning of exempt income. From the details of the expenses, we find that the prining and stationary expenses and bank charges & commision are only two items which could have direct or proximate nexus with the investment and exempt income. Therefore, the disallwoance u/s 14A r.w. Rule 8D(2)(iii) .....

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turns out to be contradictory to the actual facts and gives absured results in complete disregard to the scheme of disallowance u/s 14A. Accordingly, we delete the disallowance made by the Assessing Officer. - Decided in favour of assessee. - ITA NO.3772/Mum/2013 - Dated:- 11-3-2015 - SHRI VIJAY PAL RAO AND SHRI RAJENDRA, JJ. For the Appellant : Mr. Arvind Sonde For the Respondent : Shri Premanand J. ORDER Per Vijay Pal Rao, JM This appeal by the assessee is directed against the order dated 25.0 .....

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as compared to ₹ 45.95 crores in the preceding year. The Assessing Officer asked the assessee to furnish the explanation with regard to disallowance as per section 14A r.w.Rule 8D(2)(iii). In response, the assessee submitted that the company has disallowed ₹ 25,000/- on account of administrative expenses in its computation of income as certified by the tax audit report. It was further submitted that the direct expenses of ₹ 76,738/- on account of demant charges are separately d .....

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lowance of ₹ 25,000/-, the Assessing Officer made an additional disallowance of ₹ 7,70,905/- being the total expenses debited to the P&L account. 3. The assessee challenged the action of Assessing Officer before the CIT(A)but could not succeed. 4. Before us, the Ld. Authorized Representative of the assessee has submitted that the Assessing Officer has disalowed the total expenses debited to the P&L account by treating the same as expenditure incurred for earnign the exempt in .....

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as in the sister concerns and, therefore, it was a strategic investment and not for earning the dividend income. In support of his contention he has relied upon the decision of this Tribunal in the case of Garware Wall Ropes Ltd. Vs. ACIT dated 15.01.2014 in ITA No. 5408/Mum/2012 as well as in the case of J.M. Financial Ltd. Vs. JCIT dated 26.03.2014 in ITA No. 4521/Mum/2012. The Ld. Authorized Representative has also placed reliance on the Judgment of Hon ble Delhi High Court in the case of CIT .....

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as relevant material on record. The assessee has debited administrative and other expenses to the P&L account of ₹ 7,95,904/-, the details of the expenses are given in schedule K as under:- Schedule K Administrative and other expenses Auditor s remuneration (including service tax) For the Year ended March 31, 2010 Rs. -Audit Fees 13,236.00 -Tax Audit Fees 9,927.00 Legal and professional fees 30,142.00 Profession tax 2,500.00 Business support fees 661,800.00 Printing and stationary 478 .....

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to the P&L Account. From the details of the expenses, it is clear that most of the expenses are specific in nature and exclusively incurred for the business activity of the assessee. Therefore, the expenses on account of auditor fee, legal and professional fees, profession tax, business support fees cannot be said to have any direct or proximate nexus with the activity of investment or earning the exempt income. Thus the disallowance u/s 14A can be made only to the extent of allocation of th .....

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