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2015 (8) TMI 1027 - ITAT MUMBAI

2015 (8) TMI 1027 - ITAT MUMBAI - TMI - Disallowance under section 14A of the Act r/w Rule 8D - CIT(A) deleted the disallowance - Held that:- CIT(A) has mentioned in his order that during the year under consideration, the assessee has not invested its borrowed funds in respect of the shares which are held as investment. The learned CIT(A) has relied upon the judgment of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd(2009 (1) TMI 4 - HIGH COURT BOMBAY ) wherein .....

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nding has not been rebutted before us by the learned Departmental Representative. Therefore, we are of the view that no interference is called for in the order of the learned CIT(A) in deleting the disallowance of interest made by the Assessing Officer in the assessment order. - Decided in favour of assessee

Disallowance of proportionate expenses - Held that:- It has been argued by the learned Counsel that the disallowance needs to be worked out again, for the reason that no disallowa .....

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ted above, we set aside the order passed by the learned CIT(A) and restore the issue to the file of the A.O. for verification of the facts as narrated by the learned Counsel and to then accordingly adjudicate this issue afresh. Needless to say that the assessee should also be given adequate opportunity of hearing to put forth all the details and evidences as may be considered appropriate by the assessee in support of its contentions - Decided in favour of assessee for statistical purposes.
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portunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes. - ITA no.1394/Mum./2012, ITA no.2057/Mum./2012 - Dated:- 5-8-2015 - SHRI A.D. JAIN AND SHRI RAJENDRA, JJ. For The Assessee : Shri R.R. Vora For The Revenue : Shri N.M. Wandre ORDER PER A.D. JAIN, JUDICIAL MEMBER The present appeal by the assessee is directed against the order dated 20th December 2011, passed by the Commissioner (Appeals)-7, Mumbai, for the assessment year 2008-09. 2. The facts, as c .....

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company had suo-motu treated ₹ 52,931 as expenditure for earning exempt income and the same was disallowed in the computation of income attached with the return of income filed by the assessee company. During the assessment proceedings, the Assessing Officer confronted the assessee company about further disallowance to be made under section 14A of the Act r/w Rule 8D of the I.T. Rules, 1962. The assessee company gave its reply to the Assessing Officer. Being dissatisfied, the Assessing Off .....

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ing the assessee, deleted the disallowance under section 14A on account of interest made by the Assessing Officer of ₹ 7,87,70,940. With regard to the proportionate expenditure, the disallowance was upheld by the learned CIT(A). Against this order of the learned CIT(A), the assessee as well as the Revenue are in appeal before the Tribunal. 4. The Revenue has contested the action of the learned CIT(A) in deleting the disallowance of interest made by the Assessing Officer under section 14A r .....

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owance of ₹ 51,82,635/- under section 14A of the Act r.w.r. 8D of the Rules; 3. erred in concluding that expenses amounting to 0.5% of the average value of investment i.e. ₹ 51,82,635 is reasonable expenditure incurred for earning exempt income as per rule 8D of the Rules; 4. failed to appreciate that during the year appellant had earned exempt dividend income of ₹ 52,93,145 and suo moto disallowed the reasonable expenses of ₹ 52,931/-; 5. erred in not appreciating that t .....

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come / expenses a) Income on account of advisory fees of ₹ 28.32 lacs wrongly booked twice 8. erred in not allowing reversal of income on account of advisory fees of ₹ 28.32 lacs, which is wrongly booked twice in the accounts of the appellant; 9. failed to appreciated that though the expenses of ₹ 28.32 lacs is shown as prior period expenses, it is nothing but reversal of excess advisory fees, which is wrongly booked twice in the accounts of the appellant; 10. should have appre .....

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d as deduction from the assessment year for which it pertains to (i.e. AY 2007-08); b) Municipal taxes of ₹ 57.52 lacs 14. erred in not allowing prior period expenses of ₹ 57.52 lacs though the same were crystallized during the year and incurred for the purpose of business; 15. should have appreciated that the additional municipal taxes were crystallized during the year, as there was ongoing litigation between landlord and municipal authority on the basis of which demand was raised b .....

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vied only on returned income. The grounds raised by the Revenue are as under:- On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of ₹ 7,87,70,940/- made u/s.14A r.w. Rule 8D(2)(ii), holding that the assessee had sufficient funds for investment and no borrowed funds are diverted for the purpose of investment, without appreciating the fact that in the course of assessment proceedings, despite the opportunity provided to it, the asses .....

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has erred in deleting the addition made u/s.14A r.w. Rule 8D(2)(ii), following the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd [2009) (313 ITR 340) wherein the Hon'ble Court has held that it is for the assessee to show by production of materials that shares were acquired from funds available in its hand without taking benefit of any loan, without appreciating that the facts of the case relied upon are distinguishable from the facts of the ass .....

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take up the appeal filed by the Revenue. 5. Before us, the learned Departmental Representative supported the order of the Assessing Officer and prayed that the order of the Assessing Officer be confirmed and the total disallowance made under section 14A, be restored. 6. The learned Counsel for the assessee, on the other hand, submitted that the amount of interest disallowed by the Assessing Officer was legally and factually incorrect and the learned CIT(A) was justified in deleting the same. He .....

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. In support of this contention, the following case laws were relied by the learned Counsel:- 1. Hindustan Paper Corporation Ltd. (ITA No. 47/Ko1/2012) dated 28 September 2012 (Kol) (Page No.355-362); 2. P N Writer (ITA No. 4388/M/10) dated 14 October 2011 (Page No.363-369); 3. Shopper's Stop Ltd. (ITA No. 1448 & 4475/M/2010) dated 30 August 2011 (Mum. Trib) (Page No.371-378); 4. K. Raheja Corporation P. Limited (ITA No. 1260 of 2009) dated 8 August 2011 (Bombay HC) (Page No.379-381); 5. .....

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nder section 143(3), for the assessment year 2009-10, the Assessing Officer has passed a speaking order, accepting the claim of the assessee that no borrowed funds were used for these shares and, therefore, no disallowance was called for. The relevant portion of the assessment order for the year 2009-10 is reproduced herein below, for the sake of ready reference:- The interest expenses of the assessee are majority on account of secured loan and from adjustment loans from Government of Maharashtr .....

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ed its borrowed funds in respect of the shares which are held as investment. The learned CIT(A) has relied upon the judgment of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd, 313 ITR 340 (Bom.), wherein it was held that if there were funds available, both interest free and over draft and/or loans taken, then a presumption would arise that investment would be out of interest free funds generated, or available with the bank. Relying on this judgment of the H .....

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arned Counsel and the facts and evidences placed before us, we are of the view that no interference is called for in the order of the learned CIT(A) in deleting the disallowance of interest of ₹ 7,87,70,940, made by the Assessing Officer in the assessment order. Thus, the grounds raised by the Revenue are dismissed. 10. In the result, Revenue s appeal stands dismissed. We now take up the assessee s appeal. 11. With regard to Ground nos.1 to 6 raised by the assessee, wherein, the assessee h .....

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ed Counsel is that no disallowance under section 14A, can be made with respect to the shares held as stock-in-trade. In support of this proposition, the learned Counsel relied on the following case laws:- 1. Excel Industries Ltd. Vs. DCIT (ITA no. 1067/Mum/2012 dated 02 January 2015) (Mumbai Tribunal) 2. M/s JM Financial Limited (ITA NO. 4521/Mum/2012 dated 26 March 2014) (Mumbai Tribunal) (Page No.231-241) 3. EIH Associated Hotels Ltd (ITA No 1503/Mds/2012) dated 17 July 2013 (Chennai Tribunal) .....

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Ltd (ITA NO. 6711/Mum/2011 dated 14 September 2012) (Mumbai Tribunal) (Bombay HC Dismissed the department appeal vide its order no. ITA 1131 of 2013 dated 17 March 2015) (Page No. 289-299) CCI Ltd. Vs. JCIT (2012) 250CTR 291 (Kar. HC) (Page No.301-303) Ganjam Trading Co. Pvt. Ltd (ITA no. 3724/Mum/2005 dated 20 July 2012). (Page No.305-320) 12. At Page 169 of the paper book filed by the assessee, a re-working has been given by the learned Counsel, indicating that if the disallowance is worked ou .....

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facts as narrated by the learned Counsel and to then accordingly adjudicate this issue afresh. Needless to say that the assessee should also be given adequate opportunity of hearing to put forth all the details and evidences as may be considered appropriate by the assessee in support of its contentions. Thus, grounds no.1 to 6 are allowed for statistical purposes. 13. Ground no.7, deals with the grievance of the assessee in making addition to the book profits under section 115JB with respect to .....

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