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DCIT 3 (1) , Mumbai Versus The Baroda Rayon Corporation Ltd.

2015 (10) TMI 1509 - ITAT MUMBAI

Disallowance u/s.14A r.w. Rule 8D(2)(ii) - CIT(A) deleted the addition - Held that:- Considering all the submissions of both the parties and facts and circumstances of the case and judgment of Hon’ble Bombay High Court in the case of Reliance Utilities & Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY ), we find that the assessee had sufficient funds in the form of Share Capital amd Reserves & Surplus so as to enable it to make tax free investments. Further the exempt income is merely to the tune .....

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. CIT(A) on this issue. - Decided in favour of assessee.

Disallowance of Depreciation on Imported Car. - CIT(A) deleted the addition - Held that:- Disallowance made by the AO was not justified. It has been observed by us that AO has not anywhere mentioned that the said car was not used for the purpose of business of the Baroda 7 Rayon Co. Ltd.. assessee company. The accounts of the assesee company are audited by the statutory auditors as well as by the tax auditors. No defect has been .....

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r The Revenue : Shri Akshay J. Shah (AR) ORDER Per Ashwani Taneja (Accountant Member): The present appeal has been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals)-7, Mumbai Baroda 2 Rayon Co. Ltd.. dated 21.12.2011 for the assessment year 2008-09. The grounds raised by the revenue are reproduced hereunder: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of ₹ 7,13,542/- made u/s.14A r.w. Rule 8D .....

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penditure claimed, he has no option but to disallow such expenditure in accordance with method prescribed under Rule 8D(2)(ii)". 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of ₹ 29,45,OOO/ - made by way of disallowance of Depreciation on Imported Car holding that the depreciation has already been allowed in earlier years, without appreciating the fact that in the course of assessment proceedings the assessee has f .....

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; 7,13,542/- out of the total addition of ₹ 10,13,343/- made by the AO u/s 14A of the Income Tax Act, 1961. Baroda 3 Rayon Co. Ltd.. 4. The AO had made disallowance of an aggregate amount of ₹ 10,13,343/- u/s 14A under following heads: (i) Disallowance out of interest expenses for ₹ 7,13,542/- (ii) Disallowance out of indirect expanses (@ 0.5% of average investment for ₹ 2,99,801/- Total ₹ 7,13,542+ 2,99,801=10,13,343/- 5. The assessee contested this before the Ld. .....

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e company is a sick company having credit facility and other loans since long time which remained unpaid. It has been further submitted by the assessee company that it has in its possession huge amount of own funds which are far in excess of amount of investment made in shares. It has been further submitted that investment in shares has not been made out of borrowed funds. It is observed by us that the Ld. CIT(A) has given findings after appreciating the facts and circumstances of the case and e .....

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7; 5.99 crores can very well be assumed to have been invested from assessee s own funds. It has been further found by the Ld. CIT(A) that assessee did not make any fresh investments during the financial year in tax free securities. It was thus concluded by Ld. CIT(A) that AO could not establish a nexus between the interest expenditure and the investments made in the assets where the income was exempted from taxation. Ld. CIT(A), relying upon the judgment of Hon ble Jurisdictional High Court in t .....

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the judgment of Coordinate Bench of ITAT Mumbai in the case of Daga Global Chemicals Pvt. Ltd. vs. ACIT in ITA No.5592/Mum/2012 dated 01.01.2015 for the proposition that disallowance u/s 14A r.w Rule 8D cannot exceed exempt income. Baroda 5 Rayon Co. Ltd.. 7. After carefully considering all the submissions of both the parties and facts and circumstances of the case and judgment of Hon ble Bombay High Court in the case of Reliance Utilities & Power Ltd (supra), we find that the assessee had s .....

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that the order of Ld. CIT(A) in deleting the disallowance on account of interest for ₹ 7,13,542/- is justified and no interference is called for in the order of Ld. CIT(A) on this issue. Thus Ground no.1 of revenue s appeal is rejected. 8. In Ground No. 2, the revenue has challenged the action of Ld. CIT(A) in deleting the addition of ₹ 29,45,000/- made by way of disallowance of Depreciation on Imported Car. 9. The AO made the disallowance of depreciation claimed by the assessee on t .....

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uthorities below. It has been submitted by the assessee that the depreciation on Imported Car was calculated upon the opening WDV as per income tax and no car was purchased during the impugned assessment year. It was further submitted that the assessee company suffered heavy operational losses and therefore the entire key personnel had left the organization, the manufacturing unit was under lock out and therefore, under these circumstances it was not feasible to furnish the payment details for p .....

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