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2015 (11) TMI 1369 - ITAT AHMEDABAD

2015 (11) TMI 1369 - ITAT AHMEDABAD - TMI - Disallowance u/s 14A - Held that:- The disallowance u/s.14A of the Act can be made only, if the expenditure is related to investment wherefrom the exempt income is earned. In the present case, the ld.CIT(A) has not considered the submissions of the assessee that investments have been out of interest-free fund, for commercial expediency and the dividend income has been offered for tax. Therefore, we are unable to confirm the finding of ld.CIT(A). In the .....

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nce was made. This contention was not made before the ld.CIT(A). Therefore, in our considered view, the contention of the ld.counsel for the assessee that had it sufficient interest-free funds and the advance was given out of interest-free funds requires verification at the end of the AO and, accordingly, we hereby set aside the order of the authorities below and restore this issue to the file of AO to verify whether the advance was out of interest-free funds available with the assessee or not. .....

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rat, Judicial Member Both the appeals by the Assessee are directed against the separate orders of the Ld.Commissioner of Income Tax(Appeals)-XIV, Ahmedabad [ CIT(A) in short] dated 14/07/2011 & 25/03/2013 pertaining to Assessment Years (AYs) 2008-09 & 2009-10 respectively. Since identical grounds are involved in both the appeals, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. First, we take up the Assessee s appeal in ITA No .....

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earned CIT(A) is erroneous and contrary to provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 2. The learned CIT(A) erred in law and in facts in confirming the disallowance of ₹ 87,304/- by invoking the provisions of section 14 A r.w.r. 8 D. It is submitted that investment made by the appellant was not for the purpose of earning exempt income but with the purpose of commercial expediency. It is submitted that it be so held no .....

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business expediency in giving such advance. It is submitted that advance given was for the purpose of business and in any case no interest-bearing funds have been utilized for such advances made. It is submitted that it be so held now and disallowance made be deleted. Your appellant prays for leave to add, to alter and / or to amend all or any of the grounds before the final hearing of appeal. 2.1. First ground is general in nature which requires no independent adjudication. 2.2. Apropos to Gro .....

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897/-. The AO also made addition on account of GP rate of ₹ 24,92,246/-. The assessee being aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal; thereby the ld.CIT(A) deleted the addition of ₹ 24,92,246/-, confirmed the disallowance of ₹ 87,304/- which was made by invoking the provision of section 14A of the Act, restricted the disallowance to the extent of ₹ 7,50,000/ .....

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sions as were made before the ld.CIT(A) and submitted that in the earlier years, the assessee had invested ₹ 27,62,500/- in shares of Fortune Plastomac P.Ltd. It is a subsidiary company of the assessee. The assessee is having 83.33% shareholding in Fortune Plastomac Pvt.Ltd. He submitted that the purpose behind making investment is not earning dividend or capital gain, but on the grounds of commercial expediency. The ld.counsel for the assessee submitted that the subsidiary company is manu .....

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e submitted that there is no dispute with regard to fact that the assessee has earned exempt income. Therefore, the expenditure related to such exempt income deserves to be diallowed on the basis of provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The argument of the assessee is that the authorities below were not justified in .....

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14A read with Rule 8D, the AO is empowered to 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 such method prescribed under Rule 8D, if the AO having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which do not form part of the total income. One of the contentions of the assessee is tha .....

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the Act can be made only, if the expenditure is related to investment wherefrom the exempt income is earned. In the present case, the ld.CIT(A) has not considered the submissions of the assessee that investments have been out of interestfree fund, for commercial expediency and the dividend income has been offered for tax. Therefore, we are unable to confirm the finding of ld.CIT(A). In the light of above discussion, we hereby direct the AO to delete the addition of ₹ 84,304/-. Accordingly, .....

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e contrary, ld.Sr.DR supported the orders of the authorities below and opposed the submission made by the ld.counsel for the assessee. 6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO observed that the assessee had taken a loans of ₹ 2,11,05,468/- on which he had paid interest to the extent of ₹ 18,42,189/-. The AO observed that there is an increase into the interest expenditure from ₹ .....

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n the AY 2007-08, deleted the disallowance and also in the case of National Textile Corporation. The ld.CIT(A) has observed that the amount was given as earnest money deposit and purchase price of tender document and, accordingly, deleted the disallowance. However, ld.CIT(A) confirmed the disallowance made in respect of advance given to Shreenidhi Textiles. The contention of the assessee is that the advance was given out of interest-free funds. It is also contended that similar advances were mad .....

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nterest-free funds available with the assessee or not. In case, the AO finds that the assessee was having sufficient interest-free funds, he should also delete the disallowance made. In respect of advances given to Shree Nidhi Textiles. Thus, this ground of assessee s appeal is allowed for statistical purposes. 6.1. As a result, the appeal of the Assessee in ITA No.2358/Ahd/2011 for AY 2008-09 is partly allowed for statistical purposes. 7. Now, we take up the assessee s appeal in ITA No.1322/Ahd .....

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ous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 2. The learned CIT(A) erred in law and facts in confirming the disallowance of ₹ 78,715/- by invoking the provisions of section 14A r.w.r. 8 D. It is submitted that investment made by the appellant was not for the purpose of earning the exempt income but with the purpose of commercial expediency. It is submitted that it be so held now. In any event it .....

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