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KLJ Resources Ltd. Versus ACIT, Central Circle-04. New Delhi.

2016 (2) TMI 787 - ITAT DELHI

Disallowance u/s 14A - Held that:- To the facts of the present case the assessee has not set out whether the interest expenditure was attributable to the earning of exempt income, to be considered for disallowance under Rule 8D(2)(ii). Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D (iii).The assessee has also failed to prove that the investment made in the other companies are strategic in nature. TheLd.CIT(A) has recorded a finding that the asse .....

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e expenses. We accordingly set aside this issue for computing the disallowance by giving proper opportunity to the assessee. - Decided in favour of assessee statistically - I.T.A. No.199/DEL/2014 - Dated:- 18-1-2016 - SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri V.K. Sabharwal, Adv. For The Respondent : Shri Raman Kant Garg, Sr.DR ORDER PER BEENA A. PILLAI, JM The present appeal has been filed by the assessee against the order of the ld. .....

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s to be deleted, so that proper justice can be given to the applicant. 3. That on facts and circumstances of the case, the learned assessing officer has erred while making addition on account of Section 14A of ₹ 1,41,206/- ,which is illegal, unjustified and required to be deleted. 2. Brief facts that emerge from the order of the ld. Assessing Officer are as under:- The assessee filed its return of income for the year under consideration on 22.09.2009, declaring total income of ₹ 3,55 .....

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recording the satisfaction computed the disallowance the disallowance u/s.14A r.w.R 8D of the Act at ₹ 1,41,206/- 3. Aggrieved by the order of the ld. Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). Ld. CIT(A) observed that the assessee has earned tax free income of ₹ 900/- as dividend. Ld.CIT(A) upheld the addition made by the ld.AO. 4. Aggrieved by the order of the ld. CIT(A), assessee is in appeal before us. 4.1. Ld. AR argued that the assessee has earne .....

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g such investment as the assessee itself have sufficient capital and reserve funds. 4.2.Ld. AR demonstrated from the profit and loss account that the total capital and free reserves as on 31.3.2009 was amounting to ₹ 15,80,49,522,/-, the opening balance of investment was ₹ 1,08,93,945/- and the closing balance of investment was ₹ 1,22,19,945/-. Ld. AR submitted that ₹ 15,21,000/- (1,08,93,945-1,22,19,954), during the year has been invested in the assessee company itself w .....

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n 323 ITR 74 (P&H) iv) CIT vs. Reliance Industries Ltd., reported in 339 ITR 632 (Bom) v) CIT vs. Metalman Auto P.Ltd., reported in 336 ITR 434 (P&H) vi) CIT vs. Torrent Power Ltd., reported in 363 ITR 474 ( Guj) 5. On the contrary, ld. DR submitted that the Assessing Officer has rightly initiated section 14A of the Act and, after recording the satisfaction, has made the addition to the extent of ₹ 1,41,206/-. Learned DR submitted that even where the assessee claimed that no expend .....

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e from which does not or shall not form part of total income. The assessee has not attributed any expenditure relating to such investment, income from which is exempt from tax. Assessee s stand in not disallowing any expenditure in this regard is not acceptable though no dividend income is earned during the previous year. The ld.DR submitted that in order to disallow the expenditure it is not necessary that exempt income is earned. He submitted that as expenditure is allowed even if no income wa .....

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ncome in the hand of the assessee. On perusal of the balance sheet and Profit and loss accounts, it appears that these investments have been carried forwarded from previous years. The investment which yielded tax free income in the year under consideration is Hindustan Petroleum Corporation Ltd. and the rest are associates/related companies. 6.2. The details of the Administrative expenses are given in Schedule 15 and financial expenses are given in Schedule 16 to the profit and Loss accounts. It .....

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e amount of expenditure incurred in relation to income which does not form part of the total income in a case where an assessee claims that no expenditure has been incurred by the assessee in relation to the income which do not form part of the total income under the Act. If we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisf .....

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