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2016 (4) TMI 944 - ITAT MUMBAI

2016 (4) TMI 944 - ITAT MUMBAI - TMI - Disallowance u/s. 14A r/w Rule 8D - Held that:- As decided in assessee's own case Rule BD has to be applied in the case of the appellant and the proportionate expenditure in relation to exempt income determined. The AO has followed a method which is not fully consonant with the method provided in rule 8D.

The AO is directed to determine amount of expenditure incurred in relation to exempt income by applying the method prescribed in Rule BD. The d .....

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by the Revenue against the order of CIT(A)-8, Mumbai dated 09.7.2013 for A.Y. 2005-06. The sole ground in the present appeal is against the disallowance u/s. 14A r/w Rule 8D of the Act, on the pretext that there is diversion of funds to subsidiary company. 2. The brief facts of the case are that the assessee company which is involved in the business of real estate and infrastructure development filed its return of income on 29.10.2005, declaring loss of ₹ 3,07,18,605/-. The return of incom .....

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of assessee's own case for A.Ys. 2003-04, 2004-05 and 2005-06 against which the present appeal is filed before us. 3. Rival contention of the AR for party heard and record perused. Ld. AR for assessee's argued that the present appeal is covered by the decision of ITAT Mumbai in assessee's own case for A.Y. 1994-95 and 1996-97 decided on 25.11.2004 in ITA No. 1011/M/1999 and 1031/M/2000. DR relied on the order of A.O. 4. We have perused the order of co-ordinate bench of ITAT in assess .....

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ng the dividends. The answer, in view of the admitted factual position about the investment being in the nature of controlling interest, has to be in negative. In other words, on the facts of this case it could not be said that the investment in Corbel Estate & Investments was for the purpose of earning dividends. In this backdrop, let us now see the principles laid down by Hon'ble Calcutta High Court in the case of CIT Vs Anniversary Investment Agencies Limited (175 ITR 199). Their Lord .....

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se of income tax assessment that the dividend is required to be shown under a different head, but it continues to be in the nature of business income and no part of expenditure can be apportioned under the head income from other sources. These observations were made in a case where shares were held as stock in trade but then as clearly noted in the text of the judgment, the important factor was whether or not the expenditure was held solely for the purpose of earning dividend in which case the a .....

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sions arrived at by the CIT(A). In this view of the matter, we see no infirmity in the conclusions arrived at by the CIT(A) and approve the same.' 5. We have further noticed that while deleting the addition/disallowance u/s. 14A, ld. CIT(A), on relying the order of CIT(A) in assessee's own case for A.Y. 2003-04, 2004-05 and 2006-07, relied on the following observation: "I have considered the submissions. The issue of disallowance u/s. 36(1)(iii) has become irrelevant after introduct .....

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