TMI Blog2014 (1) TMI 1709X X X X Extracts X X X X X X X X Extracts X X X X ..... for statistical purposes. Disallowance u/s 14A - Held that:- We are unable to agree with the opinion of Ld. CIT(A). It is very clear from the judgment of the Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd., Vs. DCIT & Anr.,(2010 (8) TMI 77 - BOMBAY HIGH COURT ) that Rule 8D is not applicable to the impugned assessment year. So, the calculations prescribed under the rule cannot be invoked in the guise of reasonable disallowance. Therefore, we set aside the orders on this issue and restore the issue to the file of AO to determine the reasonable disallowance on facts and considering law on this issue. - Decided in favour of assessee for statistical purposes. Carry forward loss - Held that:- As it is observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nager Company). Observing that the said amount was paid in excess by ₹ 5,88,108/- from the terms of agreement, as the fund manager holds more than 20% equity shares in the assessee company and is also a trustee of Bellwether Microfinance Trust created by Assessee company, the AO held that there was no justification for payment of ₹ 1,00,92,636/- for the service rendered by the company. Accordingly, considering the services rendered by the fund manager company, the AO worked out the reasonable expenditure towards fund management fee at ₹ 45,58,270/- and disallowed the balance of ₹ 55,34,366/- u/s 40A(2)(b) of the Act, following the cases in case of B.K. Khanna Company (P) Ltd, Delhi High Court and in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services rendered by the fund manager after taking into various criteria. The appellant had not contended or brought out anything new on this issue but is claiming that payment is reasonable. Therefore, I am not inclined to go against the detailed reasoning brought by the AO and accordingly, the disallowance made is sustained. 4.3 Referring to the observations of AO and order of CIT(A), it was the submission that Ld. CIT(A) rejected the detailed submissions made without assigning any reason. Referring to the paper book filed, Ld. Counsel submitted that Assessee entered into an agreement as per the market norms and the payment of fund management fees is at arm s length. It was further submitted that AO has calculated the rate of tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis, 2.25% on debt investments on principle and 1% on all other investments. There are other conditions also and was subjected to minimum payment of ₹ 8 million (Rs. 80 lakhs) per annum. Vide Annexure 9 to the submissions to AO (Page 54) Assessee justified the payment and supported by various calculations made. On perusing the order of AO, we are of the opinion that AO did not examine the claim in its correct perspective at all. 4.7 As seen from the agreement, even though it was entered between Assessee company and advisor (no doubt, related person u/s 40A) the signatories to the agreement are directors on behalf of foreign investors (Gray Ghost Microfinance Fund and Hivos Triodos Fund Foundation, USA and Netherlands respectively), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of Assessee, AO invoked the provisions of section 14A r.w.s Rule 8D and worked out the expenditure relatable to earning of the above exempted income and disallowed the same. 5.2 Before the CIT(A), it was contended that Rule 8D is applicable from assessment year 2008-09 and not relevant for the subject assessment year and relied on the decisions in the cases of Chem Invest Ltd. Vs. ITO and Godjre Boyce Mfg. Co. Ltd. Vs. DCIT. 5.3 Ld. CIT(A) rejected the contention of Assessee, stating as under: 7.2 I have gone through the assessment order, the submissions of the appellant and the case laws relied upon by the appellant. It is worthwhile refer to the decision rendered in the case of Godrej Boyce Mfg. Co. Ltd. Vs. DCIT [2010] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance. Therefore, we set aside the orders on this issue and restore the issue to the file of AO to determine the reasonable disallowance on facts and considering law on this issue. Ground Nos. 8 9 are allowed for statistical purposes. 6. As regards the issue of carry forward loss, it is observed that Assessee claims set off carry forward losses, if total income becomes positive. This aspect was not contested before Ld. CIT(A) and there is no finding on this issue. This being a legal ground, we direct the AO to examine the record and allow necessary set off of carried forward losses. Ground No. 10 is allowed for statistical purposes. 7. As regards issue of interest u/s 234B, it is observed that even though calculation of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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