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Kulgam Holdings Pvt Ltd Versus ACIT, Range-4 Ahmedabad

2015 (10) TMI 1623 - ITAT AHMEDABAD

Disallowance under section 14A - contention of the assessee is that no expenditure was incurred in relation to exempt income and no material has been brought on record to show that any actual expenditure was incurred in relation to earning of exempt income - Held that:- Held that:- We find that in the instant case, the Revenue has not brought any positive material on record to show that the assessee actually incurred any expenses in relation to earning of exempt income. In our considered view, b .....

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i, AM And S S Godara, JM,JJ. For the Appellant : Shri Dinesh Singh, Sr. DR For the Respondent : Shri S N Soparkar ORDER Per N S Saini, Accountant Member This is an appeal filed by the assessee against the order of the CIT(A)-VIII, Ahmedabad dated 22.9.2011. 2. The sole ground of appeal taken by the assessee is that the CIT(A) erred in confirming the disallowance of ₹ 1,06,372/- under section 14A of the I.T.Act. 3. Brief facts of the case are that the AO observed that during the year the as .....

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penditure incurred out of the total expenditure incurred by the assessee during the year, by taking the proportion of dividend income to total exempt income and worked out the same at ₹ 5,01,024/-. 4. On appeal, the CIT(A) observed that it was hard to accept the submissions of authorized representative of the assessee that there are no expenses incurred for earning exempt income. According to the CIT(A) Rule 8D itself says that where the AO having regard to the accounts of the assessee of .....

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ovides for an amount equal to one-half percent of the average of the value of investment, the income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year, is more logical and apt, considering the facts and circumstances of the case. The CIT(A), therefore, restricted the disallowance to ₹ 1,06,372/-. 5. Being aggrieved by this order of the CIT(A), the assessee is in appeal be .....

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he assessee through ECS. This shows that there is no expenditure incurred for earning dividend income. He relied on the decision of the Hon ble Gujarat High Court in the case of CIT Vs. Torrent Power Ltd., (2014) 363 ITR 474 (Guj) and submitted that the Hon ble jurisdictional High Court has held that where there is nothing on record to indicate that there has been in fact any actual expenditure incurred by the assessee for earning tax free income, and that being question of fact, no disallowance .....

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s which were reduced to ₹ 3,000/- during the year. Thus, there was a fluctuation in the investment of the assessee, for which, management, time and cost are incurred, and therefore to say that no expenditure for earning tax free income was incurred by the assessee for earning exempt dividend income of ₹ 3,10,10,076/-, cannot be accepted. It was further argued that out of the total income shown in the profit & loss account for the year at ₹ 6.32 crores, dividend income was & .....

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nt case, the CIT(A) restricted the disallowance made under section 14A of the Act to ₹ 1,06,372/- being 0.5% of the average investment in shares on account of which the administrative charges incurred in relation to investment activities, which gave rise to exempt dividend of ₹ 3,10,10,076/-. The assessee aggrieved by this sustenance of disallowance of ₹ 1,06,372/- is in appeal before us. 9. The contention of the assessee is that no expenditure was incurred in relation to exemp .....

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of 1% of administrative expenses averred to have incurred on account of the earning of interest, there is nothing on record to indicate that there has been in feet any actual expenditure incurred by the assessee for earning tax free income of ₹ 14 crores. It is also to be noted that out of the total amount of exempt income of ₹ 14 crores, the assessee could point out that 6.12 crores (rounded off) was earned by 'S' project which was under construction for which no expenditur .....

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