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2015 (9) TMI 544 - ITAT HYDERABAD

2015 (9) TMI 544 - ITAT HYDERABAD - TMI - Disallowance u/s 14A - Held that:- The issue in dispute is squarely covered by the decision of the ITAT in assessee’s own case for AY 2009-10 [2014 (11) TMI 229 - ITAT HYDERABAD ] wherein the Tribunal sustained the disallowance under Rule 8D(2)(ii) by observing as so far as disallowance @ 0.5% on the average value of investment under rule 8D(2)(III) is concerned, we are of the view that the same is in order. Reading of the provision contained u/s 14A and .....

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assessee.

ESI contribution from the employees - disallowance u/s 36(1)(va) as amount deposited beyond prescribed due date - Held that:- As observed that different high courts while considering identical nature of dispute have held that employees contribution to PF and ESI, if, have been remitted to govt. account within the due date of filing of return u/s 139(1), the same will be an allowable deduction. See CIT Vs. Nipso Polyfabriks Ltd.[2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT .....

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cific purpose. It is not the case of the department that assessee during the year has not lent any money to its customers. That being the case, it cannot be said that borrowed funds were utilized for non-business purpose. Unless the department establishes a nexus between investment made and the borrowal of funds, no disallowance of interest expenditure on presumptive basis can be made. Further, it is not disputed that assessee was having enough surplus and reserves to make the investment in mutu .....

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. - ITA No. 24/H/15, 1928/H/14 - Dated:- 26-8-2015 - SHRI B. RAMAKOTAIAH AND SHRI SAKTIJIT DEY, JJ. For The Assessee : Shri G.V.N. Hari For The Revenue : Shri Gopinath PER SAKTIJIT DEY, J.M.: These cross appeals by assessee and the department are against order dated 24/10/2014 of ld. CIT(A)IV, Hyderabad for AY 2010-11. 2. The only issue raised by assessee in its appeal relates to disallowance of an amount of ₹ 73,76,416 u/s 14A of the Act. 3. Briefly the facts are, assessee a company is en .....

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09 and has sold all the units including opening balance worth of ₹ 295,05,66,474 on different dates prior to 31/03/2010 for a total sale consideration of ₹ 5771,02,72,551. Assessee during the year had earned dividend income of ₹ 3,52,19,276, which has been claimed as exempt from tax. AO observed that, though, interest expenditure relating to investment giving rise to exempt income was disallowed u/s 36(1)(iii), but, administrative expenditure incurred for earning dividend inco .....

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be applied in a mechanical way and unless there is nexus between the expenditure incurred and investment made no disallowance can be made, but, ld. CIT(A) did not find merit in such submissions of assessee. Ld. CIT(A) following the decision of ITAT, Hyderabad in assessee s own case for AY 2009-10, held that disallowance to be made under Rule 8D(2)(ii) does not require establishment of any nexus between the expenditure and the investments made for earning exempt income. Accordingly, she confirmed .....

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7; 74,12,030 @ 0.5% on the average value of investment under rule 8D(2)(III) is concerned, we are of the view that the same is in order. Reading of the provision contained u/s 14A and more specifically sub-section(3) of section 14A read with rule 8D(2)(iii) makes it clear, even where the assessee claims that he has not incurred any expenditure for earning exempt income, disallowance of expenditure deemed to have been incurred has to be worked out @ 0.5% on the average value of investments. As th .....

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dismissed. ITA No. 1928/Hyd/2014 by revenue 7. The effective grounds raised by the department read as under: 2. The learned CIT(A) erred in holding that the assessee's contribution towards. ESI are allowable as deduction, if the same are paid within the due date for filing return of income obvious of the fact that the relevant 'due date' as specified ujs 36(1)(va) for remittance of employee's contributions is the 'due date' in the relevant fund and are not governed by th .....

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assessee during the year has collected ₹ 16,24,219 towards ESI contribution from the employees, but, an amount of ₹ 7,82,156 was deposited beyond prescribed due date. He, therefore, disallowing the amount of ₹ 7,82,156 added back to the income of assessee for the year under consideration. 9. Assessee challenging the disallowance before CIT(A) contended that as employees contribution had been paid before due date of filing of return u/s 139(1), no disallowance of the amount can .....

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eduction. Accordingly, she deleted the addition made by AO. 10. We have heard the parties and perused the materials on record. As could be seen, the only ground for disallowance by AO is, assessee has not remitted a part of the employees contribution to ESI within the prescribed due date as provide u/s 36(1)(va). However, it is to be observed that different high courts while considering identical nature of dispute have held that employees contribution to PF and ESI, if, have been remitted to gov .....

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tion of addition made by AO on account of disallowance of interest expenditure u/s 36(1)(iii). 12. Briefly the facts are, during the assessment proceeding, AO noted that assessee in the relevant PY has made huge investment in mutual funds. He observed that the main business of assessee is micro financing i.e. lending money to poor and needy, whereas, the investment in mutual funds is not the business activity of assessee. Since assessee has earned dividend income on investment made in mutual fun .....

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at the aggregate value of investment in mutual funds during the year was ₹ 5472.44 crores. According to AO, had assessee not invested this amount in mutual fund, it would not have incurred interest expenditure to the extent invested in mutual fund. On the aforesaid analysis, AO concluded that proportionate interest @ 12% on investment in mutual fund on actual period of holding has to be disallowed u/s 36(1)(iii) and accordingly, he worked out the disallowance at ₹ 7,85,32,001. Being .....

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g disbursement to the borrowers. In support of such contention, assessee brought to the notice of CIT(A) terms and conditions imposed by the banks while advancing loan. 14. Ld. CIT(A) observed that as per the financial statements of assessee, it was having sufficient reserves and surplus to make investment in mutual funds. Relying upon a decision of the Hon ble Bombay High Court in case of CIT Vs. Reliance Utilities and Power Ltd., 313 ITR 340, ld. CIT(A) observed that when assessee was having o .....

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