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2016 (3) TMI 233 - ITAT MUMBAI

2016 (3) TMI 233 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- Hon'ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] has laid down the proposition that, if the assessee's capital, profits, reserves and surplus and current account deposits are higher than the investments in tax free securities, then it would be presumed that the investments made by the assessee would be out of interest free funds available with the assessee. Resp .....

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see has debited sum of ₹ 8.92 crores on the ‘employees costs’ which majorly constituted “salary” of the employees. As pointed out by the Ld. Senior Counsel, the only activity in relation to the investment carried out by the assessee was Switching of one HSBC Mutual Fund account to Reliance Mutual Fund account. Thus, if at all any indirect expenses is to be attributable, then same has to be estimated having regard to the accounts and nature of expenditure incurred by the assessee. The blank .....

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indirect expenses. Thus, the disallowance u/s 14A is restricted to ₹ 5 lakh and balance addition made by the AO and confirmed by the CIT(A) stands deleted - Decided partly in favour of assessee - ITA No. : 5595/Mum/2011 - Dated:- 15-10-2015 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For the Appellant : Shri J D Mistry For the Respondent : Shri Udaya Bhaskar Jakke ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against i .....

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ned a dividend income of ₹ 38,18,832/- which was claimed as exempt in computation of total income. The assessee has not computed any disallowance for earning of the exempt income. In response to the show cause notice, assessee submitted that entire investments were made out of assessee s own interest free funds, therefore, no direct or indirect expenses were incurred. However, the AO computed the disallowance as per formula laid down under Rule 8D. 3. Before the CIT(A), the assessee reiter .....

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gned facts of the case. 4. Before us Ld. Senior Counsel, Shri J D Mistry, submitted that the assessee had a share capital of ₹ 5.90 crores and reserves and surplus of more than ₹ 93.80 crores. As compared to this, the investment in mutual funds were ₹ 69.50 crores. Therefore, the presumption is that the investment has been made mostly out of reserves and surplus. In any case, he submitted that the assessee had given a fund flow statement, which is available at page 11 of the pa .....

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Fund On 25.03.2008 (69,00,00,000) Redemption others (14,00,00,000) Closing balance as on 31.3.2008 41,03,289 Reliance Money Manager Mutual Fund (Institutional option dividend plan) Particulars No. of Units Rate Balance (Rs) Purchased out of redemption proceeds of HSBC MF 6,89,216.774 1,001.1364 69,00,00,000 Dividend reinvestment 877.279 1,001.1364 8,78,276 6,90,094.053 69,08,78,276 Redemption - Closing balance as on 31.3.2008 6,90,094.053 1,001.1364 69,08,78,275 Thus, he submitted that no intere .....

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SBC account to Reliance Mutual Fund. For this purpose such a huge indirect disallowance cannot be made, looking to the fact that when the exempt income itself is only ₹ 31.81 lakhs. 5. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 6. After considering the rival submissions and on perusal of the impugned orders and material on record, we find that not only the assessee has shown that it has a huge surplus funds for making the investment but has also shown the avail .....

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