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M/s Estrela Batteries Ltd Versus Deputy Commissioner of Income Tax, Circle-2 (1) , Mumbai

2015 (10) TMI 1587 - ITAT MUMBAI

Disallowance u/s 14A r.w.r 8D - whether rule 8D cannot be made applicable without first rejecting the claim of the appellant as envisaged under sub-section (2) of section 14A? - Held that:- Considering the argument of the assessee, similar disallowance can be made in the year under consideration after examining the expenditure claimed in the year under consideration provided the expenses in this year is comparable. Both the parties agreed for remanding this issue for the limited purpose of analy .....

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Rao, AM And Vijay Pal Rao, JM,JJ. For the Appellant : Shri Vijay Mehta For the Respondent : Shri Neil Philip ORDER Per: D Karunakara Rao,AM. The present appeals preferred by the assessee is directed against the impugned order dated 8th September 2011, passed by the learned Commissioner (Appeals)-4, Mumbai, for the assessment year 2008-09. The grounds raised by the assessee are as under:- "1. On the facts and in the circumstances of the case and in law the learned CIT(A) failed to appreciate .....

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s of the case are that the assessee received dividend income of ₹ 3,48,96,184, which was claimed exempt from income tax and hence, the assessee offered an amount of ₹ 15,37,932 for disallowance under section 14A, in its return of income on estimate basis. The Assessing Officer, however, applied rule 8D of the I.T. Rules, 1962 and made disallowance of ₹ 5,79,00,014, aggrieved by which, the assessee carried the matter before the first appellate authority. 3. The learned CIT(A), a .....

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ng to the earlier year and the income is also taxable from such certificates. The learned CIT(A), accordingly, directed the Assessing Officer to verify the items which have been wrongly included in the closing and opening balance and recalculate the disallowance on account of administrative expenses to the extent of 0.5% of average investment which the assessee has calculated at ₹ 10,93,779 and restrict the disallowance under section 14A to such recalculated amount. Being aggrieved, the as .....

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the Tribunal in assessee's own case in ITA no.7370/ Mum./2012, order dated 20th March 2015, for the assessment year 2009-10, wherein the co-ordinate bench, while speaking through one of us (A.M), allowed the claim of the assessee for the reasons as stated in Para-6 of its order which is reproduced below:- "6. We Have heard the rival submissions and also perused the relevant material placed on record. From the perusal of the profit and loss account, it is seen that the assessee has debi .....

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nvestment, it is seen that most of the investment have been made in mutual funds and deposits in the HDFC Ltd. Some of the investment has already been directed by the CIT(A) to be excluded. If the nature of investment and overall indirect expenses is taken into consideration, then it cannot be said that such a huge disallowance of ₹ 26,45,200 is called for as worked out by the A.O. Rule 8D is not a mechanical provision which is to be resorted whenever there is disallowance u/s 14A(1). The .....

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sessing Officer having regard to the account of the assessee is not satisfied with the correctness of the claim in respect of such expenditure incurred in relation to the exempt income. In other words the A.O. has to examine the nature of expenditure vis-a-vis the earning of the exempt income. Here in this case the assessee had offered ₹ 2,40,000 for the purpose of disallowance. However, the A.O. without examining the same has proceeded to apply rule 8D, as if it is a natural corollary to .....

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