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2016 (5) TMI 317

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..... taking into account the above mentioned documents to decide the claim of the assessee in the interest of the justice therefore we restore this issue upon the file of Assessing Officer again to decide the matter afresh after giving an opportunity of being heard to the assessee in accordance with law - Decided in favour of assessee Disallowance u/s. 14A - Held that:- As per the bank sanction letter, the appellant is required to maintain a minimum term deposit of 25% of this limit as margin money. The appellant has invested more money in fixed deposits in order to obtain additional letters of credit from the bank at short notice. The appellant submits that the borrowed money was utilized for the purpose of business and not for the purpose of investment in share. Further, all expenses pertaining to the exempt income like D’mat charges, bank charges, etc. are debited by the appellant to his personal capital account and not to the business accounts. Therefore it is quite clear that no expenditure of any kind was occurred to get the exempt income therefore in these said circumstances no disallowance of expenses is required u/s. 14A read with Rule 8D of the Act - Decided in favour of as .....

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..... had confirmed the loans by way of loan confirmation letters and also in the statement on oath before the CIT(A): a) Ms. Manchhagauri A. Andharia ₹ 1,00,000/- b) Mr. Gopalji V. Variya HUF ₹ 5,00,000/- c) Ms. D.S.Mehta ₹ 4,95,000/- 2) The appellant prays that the addition on account of alleged unexplained cash credits of ₹ 10,95,000/- as made by the AO and confirmed by the CIT(A) is required to be deleted: a) Ms. Manchhagauri A. Andharia ₹ 1,00,000/- b) Mr. Gopalji V. Variya HUF ₹ 5,00,000/- c) Ms. D.S.Mehta ₹ 4,95,000/- B. Disallowance u/s. 14A ₹ 99,093/- 3) The learned CIT(A) having held that the appellant had not incurred any direct or indirect expenditure for earning the exempt income erred in confirming the disallowance u/s.14A to the extent of ₹ 99,093/- out of the disallowance of ₹ 5,11,228/- as made by the AO 4) The appellant prays that the disallowance u/s.14A of ₹ 99,093/- as confirmed by the CIT(A) may be deleted. C. Disallowance out of sales promotion expenses -Rs.6,177/- 5) The learned CIT(A) erred on facts and in law in upholding the order of th .....

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..... he claim which has not considered by the learned CIT(A) wrongly and illegally therefore the order of learned CIT(A) is wrong against law and facts and is liable to be set aside. However the learned Departmental Representative has refuted the said contention. The Assessing Officer has declined the loan taken from Manchhagauri M. Andharia, Gopaliji V. Variya and D.S.Mehta. The assessee has furnished the following documents at the time of arguments:- Sr. No. Particulars Mr. Gopalji V. Varaiya H.U.F.(Relation nil) 1. Confirmation letter 2. Copy of Bank Pass Book 3. Income Tax Acknowledgement 4. Computation of Total Income 5. Balance Sheet as at 31st March, 2008 6. Form 15G Ms. Manchhagauri M. Andharia (Relation-Mother-in law) 1. Confirmation letter 2. Bank State .....

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..... rt also confirmed the transactions but raised the point of creditworthiness of the creditors. Now it is to be seen whether the claim of the assessee has rightly been declined by the authority below. Before going further to decide the matter of controversy it is observed that the learned CIT(A) accepted the additional evidence but arrived at this conclusion that the lender were not having capacity to give the loan therefore the loan given by above said three person falls under section 68 of the Act. The relevant para of the finding of the learned CIT(A) is hereby reproduced as under: 1.3.8 As regards the identity of the persons who had given loan to the appellant there is no dispute. The creditworthiness of Mr. Gopalji V. Varaiya HUF who had given loan of ₹ 5 lakhs to the appellant required to be examined in respect of their creditworthiness of advancing such a loan. From a perusal of the computation of total income it can be seen that the gross total income of the HUF is ₹ 1,64,727 for A.Y.2009-10 and in earlier year it is even less than this, after claiming deduction under section 80C the net taxable income of the Mr. Gopalji V. Varaiya HUF is below the taxable inc .....

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..... ingly upheld. This ground of appeal is thus dismissed. Apparently, the learned CIT(A) discredited the said credit on the basis of creditworthiness. He relied upon the Income Tax return of the creditors. Gopalji V. Varaiya HUF produced the confirmation of account at page 3 of the paper book wherein the closing balance has been shown to the tune of ₹ 10,61,049.00. Copy of pass book has also been produced at page 4 and 5 of the paper book which speaks about the withdrawal of the said money. No doubt these documents have not been discussed in the order however in the written submissions before us these document only on the file of the CIT(A) as well as Assessing Officer. Accordingly, the loan received from Late Manchhagauri M. Andharia is concerned, in this regard the confirmation of account for the period from 01.04.2008 to 31.03.2009 is on the file which speaks about the closing balance of the Manchhagauri M. Andharia is to the tune of ₹ 4,44,230.00. Bank statement of Hina Maganlal Andharia has also been produced which is at page 7 of the paper book and speaks about some transactions which is required to be verified in the interest of justice also. However, it is also .....

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..... ablishing the fixed deposit with the bank which was required as collateral security by the bank for letter of credit for import of chemicals. It was empathetically asserted that none of the loan, taken on which interest was paid, was utilized for investment purposes. In view of these facts, we find merit in the explanation of the assessee, consequently, this ground of assessee is allowed. 5.1 Turning to the case in hand it is specifically asserted by the assessee that the appellant is maintaining separate accounts of the business carried on by him and his investment activities. The investment activities and its expenses are reflected in the appellant s personal accounts. No expenses pertaining to the investment activity are debited to the business accounts. Further, though the investment has been made out of the proprietary concern s bank account, the same has not been made out of borrowed funds but out of own funds, as is evident from the copies of bank statements filed with AO also. The appellant s capital account shows a figure of ₹ 3,85,83,534/-. As against this, the appellant has invested in fixed assets of ₹ 2,00,977/- and current assets of ₹ 2,67,57,531 .....

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