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2015 (9) TMI 1343 - ITAT MUMBAI

2015 (9) TMI 1343 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- No justifiable reason to interfere with the conclusion drawn by the CIT(A). Notably, the disallowance computed by the Assessing Officer based on Rule 8D of the Rules is not tenable in as much as Rule 8D is applicable only w.e.f. assessment year 2008-09 as laid down by the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd. vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT ). Nevertheless, the provisions .....

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tenable by the Revenue before us. Therefore, we find no justifiable reason to interfere with the ultimate conclusion drawn by CIT(A) for assessment year 2005-06, which is hereby affirmed. - Decided against revenue.

Disallowance of interest expenditure - Held that:- CIT(A) has directed the Assessing Officer to examine whether the investments made in mutual funds were out of non-interest bearing funds or not; and if the Assessing Officer found it to be made out non-interest bearing fund .....

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ect also we find no error on the part of the CIT(A) in directing the Assessing Officer to determine the disallowance on a reasonable basis following the judgement of the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd.(supra).- Decided against revenue. - ITA No.8535/Mum/2010, ITA NO.8536/MUM/2010, ITA NO.8537/MUM/2010 - Dated:- 31-8-2015 - SHRI G.S. PANNU AND SHRI SANJAY GARG, JJ. For The Appellant : Ms. Laxmi Handa Puri For The Respondent : Shri Harish M. Motiwala ORDER .....

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ce made by the Assessing Officer by invoking the provisions of section 14A of the Act. The solitary Ground raised by the Revenue is commonly worded in all the three appeals, which reads as under:- On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to disallow the expenses as per the direction of the Honourable Bombay high court in the case of M/s Godrej & Boyce m Mfg. co . Ltd Vs. DCIT which is not accepted by the department. 3. The brief backgro .....

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ispute before us relates to the disallowance made by the Assessing Officer under section 14A of the Act, on the ground that assessee had incurred certain expenditure in relation to the earning of exempt incomes. 4. Firstly, we may take up the appeal pertaining to the assessment year 2005-06 wherein, the relevant facts as follows. In the course of the impugned assessment proceedings, it was noticed that assessee company had earned dividend income of ₹ 7601/-, which was claimed as exempt und .....

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the return of income originally filed under section 139(1) of the Act where a disallowance of ₹ 3800/- was already made, the balance of ₹ 14,54,429/- ( ₹ 14,58,229 minus ₹ 3,800/-) was added to the returned income. 5. Before CIT(A), assessee did not dispute the amount of interest expenditure of ₹ 2.07,809/- disallowed by the Assessing Officer out of the total disallowance of ₹ 14,54,429/-. For the balance of the disallowance, the assessee company contended th .....

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₹ 18,73,724/- was invested in a foreign subsidiary, the dividend from whom was taxable. Further, an amount of ₹ 2,00,000/- was invested in NSE, and the dividend income from it is also taxable. In this manner, assessee contended that no fresh investments were made, which would yield exempt income; and, that the administrative expenses incurred for earning of exempt income quantified at ₹ 3800/- in the original assessment proceedings was quite justified and that no further disal .....

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the Act determining an amount of ₹ 3800/-, as relatable to the earning of exempt income was reasonable and no further disallowance was required to be made. As a consequence the CIT(A) has directed the Assessing Officer to delete a sum of ₹ 12,46,620/- and retain the balance disallowance of ₹ 2,07,809/- u/s. 14A of the Act. 7. Before us, Ld. CIT-DR, appearing for the Revenue has primarily reiterated the stand of the Assessing Officer which is based on application of Rule 8D of t .....

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8-09 as laid down by the Hon ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd. vs. DCIT (supra). Nevertheless, the provisions of section 14A of the Act, require disallowance of expenses related to the earning of exempt income. In this context, the Assessing Officer has not made any effort to demonstrate that the estimation of such expenditure at ₹ 3800/- made during the original assessment proceedings was unreasonable. The CIT(A), on the other hand, has noted that e .....

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ed, it was a common point between the parties that the facts and circumstances are similar to those considered by us in the appeal for A.Y 2005-06. Therefore, our decision in appeal of the Revenue for A.Y 2005-06 shall apply mutatis mutandis in the appeal for A.Y 2004- 05 also. Consequently, the appeal of the Revenue for A.Y 2004-05 is also hereby dismissed. 12. The only remaining appeal of the Revenue is in relation to A.Y 2007-08. In assessment year 2007-08, the assessee was found to have earn .....

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earning of exempt income. 13. In appeal before CIT(A), the assessee contended that the investments made in mutual funds, etc., which yielded the exempt income were made out of interest free funds, and that the interestbearing borrowed funds were not at all used for making such investments. The CIT(A), in para 5.2 of his order has tabulated the mutual funds/securities, in which the investments have been made and he has also tabulated the source from where such investments have been made. The Tabu .....

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made in the mutual funds came out of interest- free funds and, therefore, no interest-bearing borrowed funds were utilized for making investments in mutual funds and for the said reason the CIT(A) concluded that no disallowance was required to be made out of interest expenditure with regard to investments. However, while concluding, CIT(A) directed the Assessing Officer as under:- The A.O is directed to verify whether the investments made in the Mutual Funds were made out of the QIP proceeds; an .....

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instead directed the Assessing Officer to determine disallowance on a reasonable basis as per the directions of the Hon ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd. vs. DCIT(supra). Against such decision of the CIT(A), Revenue is in appeal before us. 14. In the above background, we have heard the rival Counsels and find that there is no justification for interfering with the order of CIT(A) on the aspect of the disallowance under section 14A of the Act. 14.1 In so fa .....

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