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DBH International Pvt. Ltd Versus ITO, Ward 10 (2) , New Delhi

2015 (9) TMI 605 - ITAT DELHI

Disallowance under section 14A read with Rule 8D - suo moto disalllowance - Held that:- It is seen that the appellant company itself has made the disallowance of expenditure u/s 14A r.w.r. 8D of ₹ 1,39,39,685/. The claim of disallowance made by the appellant company was examined by the AO during the course of assessment. The appellant produced the books of accounts and the evidences, which the ld. Assessing Officer had verified the ld. AO examined the books of accounts, evidences and recor .....

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e ₹ 1,39,39,685/-. - Decided in favour of assessee. - I.T.A .No.-5507/Del/2012 - Dated:- 28-8-2015 - SHRI T.S. KAPOOR AND SMT. BEENA PILLAI, JJ. For The Appellant : Sh. G.S. Grewal & Mrs. Harsimran Grewal, CA For The Respondent : Smt. Parwinder Kaur, Sr. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER: This is an appeal filed by the Assesee against the order of ld. CIT(A)-XIII, New Delhi dated 07.08.2012 on the following grounds: 1. Assessing Officer, Ward - 10(2) has erred in disallowing & .....

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ssessee is engaged in the business of mining activities for extraction of raw clay matrix which is used by processed clay manufacturers. The Appellant has made investments in Thapar Group of Companies for earning exempt income and also controlling stakes. The appellant has shown average investments in shares of Group Companies amounting to ₹ 1,81,39,59,779/- and has earned dividend income amounting to ₹ 17,62,49,648/- during the year under consideration. The case was selected for scr .....

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an appeal before the first appellate authority. The ld. CIT(A) confirmed the action of the AO and sustained the disallowance. Against the order of the ld. CIT(A), the assessee is now in appeal before us. 4. The ld. AR submitted before us that, the Appellant had earned exempt income of ₹ 17,62,49,648/- as dividend income and had voluntarily disallowed ₹ 1,39,39,685/-under section 14A of the Act. The detail of disallowance being: i) Interest Expenses : Rs.1,30,70,204/- ii) Depository E .....

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further disallowed ₹ 88,38,084/- over and above the voluntary disallowance made by the appellant u/s 14A amounting to ₹ 1,39,39,685/- against the dividend earned by the appellant during the year. 6. The ld. AR submitted that AO has completely disregarded the computation of taxable income, books of accounts and division wise profit and loss account furnished by the appellant and proceeded mechanically apply Rule 8D of the Income Tax Rules, 1962. The ld. AR further submitted that the .....

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the other hand, the ld. DR present supported the stand of the CIT (A) on the issue. The Ld. D.R. placed reliance on the decision of coordinate bench in the case of T&T Motors Ltd., in ITA no. 6490/Del/2010 for assessment year 2009-10. 8. Having considered the rival submissions and after carefully perusing the records, we find that during the relevant previous year, apart from interest expenses, loss on sale of investments, depository charges and common expenses, the assessee had incurred the .....

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me, loss on sale of investments, depository charges and common expenses(refer page 6 of the statement of total income for y.e.31.03.2009). It was, therefore, pleaded that personal expenses, administrative and other expenses and selling & distribution expenses should not be considered for the purposes of disallowance u/s 14A of the Act. We find force in the argument of the ld. A.R in this regard. 9. We also find that the AO has neither recorded his satisfaction nor given reasons as to how the .....

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be triggered only if the AO records a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore the condition precedent for the AO for determination of the amount of the expenditure incurred in relation to exempt income is that, the AO must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. In other words, sub-section (2) deals with cases where the assessee specifies .....

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determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method stipulated in Rule 8D of the Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the AO would have to indicate cogent reasons for the same. It is, therefore, clear that determination of the amount of expenditure in relation to exem .....

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unts and the evidences, which the ld. Assessing Officer had verified the ld. AO examined the books of accounts, evidences and records of the appellant and verified the voluntary disallowance by appellant u/s 14A of the Act. The AO has not pointed out any deficiency in the books of accounts nor in respect of claim of the appellant u/s 14A of the Act. In other words, the AO has not expressed satisfaction that the appellant s claim u/s 14A is incorrect, a prerequisite for invoking the provisions of .....

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unt of expenditure in relation to income not ineluctable in total income in the manner indicated in sub-rule (2) of Rule 8D of the said Rules. 12. The Hon ble Delhi High Court also held that the AO should assign cogent reason for arriving at such satisfaction. The following judicial pronouncements support the above propositions of law: CIT vs. Walfort Share & Stock Brokers: 326 ITR 1 (SC) Godrej & Boyce Mfg. cs. Ltd. v. CIT: 328 fTR 81 (Bom.) CIT vs. Hero Cycles: 323ITR 518 (P&H) CIT .....

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e bench has recorded in para 5 therein that the assessee had incurred certain expenses which was attributable to the earning of exempt income. However in the facts of the present case before us, the assessee has suo mote disallowed expenses under section 14A of the Act. The Ld. D.R, contended that in the event there are any deficiency left by the A.O in recording proper satisfaction, the same can be made good by the Ld. CIT(A). In the facts of the present case the Ld. CIT(A) has not compensated .....

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