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2016 (2) TMI 677 - ITAT MUMBAI

2016 (2) TMI 677 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- We have observed that the assessee company has own funds of around ₹ 40.79 crores as at 31-03-2010 which comprises share capital and reserves as per balance sheet filed in the paper book. We have also perused the copy of balance sheet as well as the P&L account where it is clear that the assessee company has earned no dividend income during the previous year relevant to the assessment year and in view in the case of .....

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will not apply if no exempt income is received or receivable during the relevant previous year. Thus disallowance deleted - Decided in favour of assessee - I.T.A. No. 2712/Mum/2014 - Dated:- 8-2-2016 - Shri Amit Shukla, Judicial Member And Shri Ramit Kochar, Accountant Member For the Petitioner : Shri J.P. Bairagra For the Respondent : Shri Abani Kanta Nayak ( D.R.) ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee company, being ITA No. 2712/Mum/2014, is directed ag .....

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1 inspite of the fact that: a. During the year under consideration the Appellant had not incurred any expenditure, whether direct or indirect for the earning of the exempt income. b. The provisions of Rule 8D of the Income tax Rules are not applicable in the present case as there is no expenditure incurred at all. The provisions of rule 8D are attracted once there is any element of Direct/indirect expenses. In the present case the Appellant had clearly made out that it has not incurred any expen .....

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d in upholding the additions by deeming that the Appellant would have incurred an expenses for earning the Exempt Income by holding that the "expenditure incurred by the assessee in relation to the income is wide enough to cover all forms of expenses provided that have some connection with the exempt income . While upholding the addition made by the AO, the learned Commissioner - Appeals failed to appreciate that there was no expenses incurred whatsoever for earning the exempt income. Hence .....

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Managerial or financial". In the present case the Appellant has not incurred any expenditure - nor has the Learned Commissioner gave any finding of any expenditure having incurred - hence the said decision is not applicable to the facts of the case. 3. The brief facts of the case are that the assessee company is engaged in the business of generation of power produced through wind turbine generators. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Inco .....

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e which does not or shall not form part of total income as required u/s 14A of the Act in accordance with the provisions of Rule 8D of Income Tax Rules, 1962. The assessee company was asked to furnish the details of its investments. The assessee company, in response, contended that it has made investment in the preference shares of its group companies and it has not received any dividend during the year. The assessee company further contended that no expenditure is incurred on making investment .....

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0.5% of average of the investments held by the assessee company, whereby total disallowance of ₹ 3,02,500/- was made by the AO vide orders dated 31.01.2013 . 4. Aggrieved by the orders dated 31.01.2013 passed by the AO, the assessee company preferred an appeal before the CIT(A). 5. Before the CIT(A), the assessee company reiterated the submission what was made before the A.O. and submitted that the investments were made out of its own reserves and surplus and the assessee company has not b .....

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ring the year for making the above investments. The assessee company submitted its bank book and bank statement to support its contentions. The CIT(A) held that all expenses connected with the exempt income have to be disallowed u/s 14A of the Act regardless of whether they are direct or indirect, fixed or variable and managerial or financial and whether the income is earned or not earned , thus the CIT(A) vide orders dated 21.02.2014 upheld the additions made by the A.O. 6. Aggrieved by the ord .....

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company has made such investments. No loan is appearing in the balance sheet. No direct or indirect expenditure has been incurred during the year for making the investments. The ld. Counsel of the assessee company contended that the assessee company has not incurred any expenditure during the financial year 2009-10 to earn the exempt income. The ld. Counsel for the assessee company showed us the balance sheet of the assessee company which is placed in paper book filed with the Tribunal, wherein .....

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IT [2015] 61 taxmann.com 118 (Delhi) and submitted that since there is no dividend received by the assessee during the year, the ratio laid in the above case is applicable to the present case. The assessee company also relied upon the decision of Hon ble Bombay High Court in the case of CIT v. HDFC Bank Limited , 366 ITR 505(Bom.). 8. The ld. D.R., on the other hand, relied upon the orders of authorities below and submitted that the A.O. has rightly applied Rule 8D of Income Tax Rules ,1962 in t .....

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