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DCIT, Circ. 4 (1) , New Delhi Versus M/s Lemon Tree Hotels Pvt. Ltd.

2016 (2) TMI 788 - ITAT DELHI

Disallowance u/s 14A - Held that:- The third limb of Rule 8D (2), deals with disallowance an amount equal to 1 ˝ of the average of the value of investment, income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee on the first day and the last day of the previous year. The language of this sub-section is very clear to hold that only those investments should be considered under this limb from which exempt income has been earned during .....

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f the above discussion and findings, set aside this issue to the file of the Assessing Officer for re-computing the disallowance u/s 14A r/w Rule 8D(iii), with a specific direction to consider only those investments from which the assessee has earned tax free income for the year under consideration. It is specifically mentioned that the disallowance has to be made in accordance with law under Rule 8D (2)(iii) for the year under consideration. - I.T.A .No. 209/DEL/2014 - Dated:- 18-1-2016 - SHRI .....

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ricting the addition u/s 14A read with rule 80 from ₹ 1,78,71,632/- to ₹ 35,10,8441- ? 2 Whether on the facts and in the circumstances .of the case & law, the Ld. CIT(A) erred in deleting the addition of ₹ 1,68,10,2431- made by the A.O. in respect of expenses debited in P&L A/c under the "Employee Stock Option cost"? 3. Whether on the facts and in the circumstances of the case & law, the Ld. CIT(A) is perverse in nature as the same is in contradiction with .....

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loss of ₹ 4,22,08,912/-. The case was selected for scrutiny and notice u/s 143(2) was issued to the assessee. The Assessing Officer during the assessment proceedings observed that the assessee is engaged in the business of owning, operating and managing hotels, motels, resorts, restaurant etc. During the year under consideration, the assessee has made various investments and, therefore, the ld. Assessing Officer computed the disallowance u/s 14A r/w Rule 8D to the extent of ₹ 1,78,71 .....

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it to be an allowable deduction and, therefore, deleted the addition made by the ld. Assessing Officer. 3. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us now. 3.1. At the outset, the assessee submits that ground no. 2 and 3 stand covered by the order of this Tribunal in assessee s own case for assessment year 2008-09 vide order dated 23.6.2014 in I.T.A. No. 4588/Del/13. He submitted that the revenue had preferred an appeal before the Hon'ble Jurisdictional High .....

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de order dated 4th August, 2015. The Hon'ble High Court dismissed the appeal filed by the revenue for assessment year 2008-09 vide its order dated 18.8.2015. 3.2. We, therefore, respectfully following the order of the Jurisdictional High Court in assessee s own case, dismiss these grounds of appeal filed by the Revenue. 3.3. Ground no. 4 and 5 are general in nature and, therefore, the same are not adjudicated upon. Ground No.1 4. This issue relates to the restriction of the disallowance u/s .....

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al amounted to ₹ 79.84 crore and, therefore, the shareholders fund of the assessee for the relevant year increased from ₹ 279.82 crores to ₹ 363.91 crores as on 31.3.2009. 4.1. Ld. AR submits that the total investment made in shares during the year under consideration amounted to ₹ 78.47 crores. He argued that the assessee had sufficient interest free funds to make such investment in shares and no fresh borrowings were required for such investment made during the year. 4. .....

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such investment and question of disallowance of attributable interest expenditure does not arise to the facts in hand. Ld. AR placed his reliance on the following decisions:- a) Relaxo Footwears Ltd. vs ACIT (20-12) 18 taxmann.com 333 (Delhi) b) ACIT vs SIL Investment Ltd. (2012) 54 SOT 54 (Del) c) ACIT vs Mohan Exports (P) Ltd. (2012) 138 ITD 108 (Delhi) d) Siva Projects Engineering & Enterprises Ltd. (I.T.A.No.1896/Mds/2011) e) REI Agro Ltd. (I.T.A.No. 1331 & 1423/Kol/2011) f) CIT vs .....

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t are also operating or setting up Lemon Tree hotels with a view to obtain controlling interests. He submitted that the investments made by the assessee during the year under consideration are in the subsidiary companies from its own surplus interest free funds available with the assessee on which no interest expenditure has been incurred. 5. On the contrary, ld. DR relies upon the orders of the authorities below. 6. We have perused the orders of the authorities below, the paper book filed by th .....

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4A r/w Rule 8D. 6.2. It is an accepted position that as the year under consideration is 2009-10, Rule 8D is applicable to the assessee and that there has to be a disallowance u/s14 A of the Act, that needs to be made in the event of earning any exempt income from investments made by the assessee during an assessment year. The disallowance u/R. 8D has to made by applying, sub clause (i), (ii) and (iii) of sub section 2 of R.8D. Sub clause (i) & (ii) relates to direct and indirect expenses tha .....

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