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2016 (2) TMI 514 - ITAT KOLKATA

2016 (2) TMI 514 - ITAT KOLKATA - TMI - Disallowance u/s 14A - Held that:- We find that the assessee had voluntarily disallowed a sum of ₹ 4,67,484/- u/s 14A of the Act with some basis. We find that the assesee does not have any debt funds and hence no interest is debited. The fact is that no investments were made during the previous year relevant to Asst Year 2009-10 out of the money borrowed from outside the company. Thus there is no element of interest cost involved in connection with i .....

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nts of the Learned AR that only investments yielding exempt income should be considered for the purpose of disallowance u/s 14A read with Rule 8D of the Rules. - Decided in favour of assessee - ITA No. 465/Kol/2013 - Dated:- 13-1-2016 - Shri N.Vasudevan, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : Shri B.K Ghosh & Pijush Dey, FCAs, ld.ARs For The Respondent : Shri S.S Alam, JCIT/Sr.DR ORDER SHRI M.BALAGANESH, AM : This appeal of the assessee arises out of t .....

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is that the assessee had derived the following exempt income :- Dividend from Mutual Funds 1,61,72,775 Dividend from Shares 14,19,096 Tax free interest 3,84,725 1,79,76,596 The assessee voluntarily disallowed a sum of ₹ 4,67,484/- u/s 14A of the Act in the revised computation of income filed before the completion of assessment proceedings together with workings for the same. The Learned AO ignoring the said workings, directly proceeded to make disallowance u/s 14A of the Act to the extent .....

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elt out by the Learned AO in the order. On first appeal, the Learned CIT(A) upheld the addition made by the Learned AO. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeals) - VI, Kol has erred in confirming the disallowances amounting to ₹ 12,24,192 under section 14A without bringing on record any cogent reasons for disregarding and rejecting the estimate including the manner of makin .....

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erred in disregarding the order of Learned CIT(A) - VI, Kolkata in respect of assessment years 2006-07 and 2007-08 in the appellant's own case (Appeal No. 850/CIT(A)- VI/Cir-6/Kol/2009-10 and Appeal No. 569/CIT(A)-VI/Cir-6/Kol/2008- 09 respectively and Orders dated 29/11/2010) in which 1 % of the taxfree income was held to be reasonable expenses for the purpose of disallowances under section 14A. 4. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeals)-VI, Kol ha .....

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; 4,67,484/- by adopting the following basis :- The investment decision of the company was taken by the Managing Director , CEO and one Assistant Vice President of the company. Therefore a part of their salary has been considered as amount of expenses attributable to earning of exempt income. - Total salary paid to these persons during the financial year 2008-09 relevant to Asst Year 2009-10 amounted to ₹ 19,16,408/-. (A) - Total exempt income derived by the assessee is ₹ 1,79,76,596 .....

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Rule 8D(1) of the Rules as to why the disallowance figure quoted by the assessee is not correct. Without recording satisfaction in terms of Rule 8D(1) of the Rules, the Learned AO cannot proceed to invoke Rule 8D(2) of the Rules. The Learned AO without prejudice to his main argument, argued that even assuming if disallowance u/s 14A is made in terms of Rule 8D of the Rules, then only the investments yielding exempt income should alone be considered for the purpose of Rule 8D of the Rules. In res .....

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d from outside the company. Thus there is no element of interest cost involved in connection with investment made during the year. The Learned AO without controverting the said workings and without recording his satisfaction with cogent reasons as to why the said figure is incorrect, directly embarked on invoking Rule 8D(2) of the Rules. In our opinion, this action of the Learned AO is not in accordance with law. We hold that the satisfaction need to be recorded in terms of Rule 8D(1) by the Lea .....

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not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT (A)". CIT vs R.E.I. Agro Ltd in GA 3022 of 2013 in ITAT 161 of 2013 dated 23.12.2013 rendered by Calcutta High Court The Assessing Offic .....

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