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2016 (5) TMI 327 - ITAT MUMBAI

2016 (5) TMI 327 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- It is noted that the assessee claimed that nil expenditure was incurred by the assessee in relation to earning of dividend income and ₹ 9,95,435/- was incurred by way of interest, which is not directly attributable to any source of income (Rs.97,21,446/-) Considering the totality of facts, argument of the assessee we are of the view, that at best, the disallowance may be restricted which cannot exceed the exempt inco .....

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Accountant Member For The Revenue : Shri M. Murli-DR For The Assessee : Shri K. Shivaram ORDER Per Joginder Singh (Judicial Member) Both these appeals are by the assessee for assessment year 2009-10 and 2010-11, aggrieved by the impugned orders dated 16/07/2012 & 31/07/2013 of the ld. First Appellate Authority, Mumbai. First, we shall take up the appeal for A.Y. 2010-11, wherein, the first ground pertains to disallowing ₹ 23,03,775/- u/s 14A of the Act read with rule 8D of the Rules, .....

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of ₹ 23,03,775/-, u/s 14A was on notional basis, therefore, be deleted. 2. During hearing, the ld. counsel for the assessee, Shri K. Shivaram, relied upon the decision in the case of M/s Daga Global Chemicals vs ACIT (ITA No.5592/Mum/2012)(Mum. Trib.), holding that the disallowance cannot exceed the exempt income. On the other hand, the ld. DR, Shri M. Murli, though defended the stand taken in the impugned order but did not contradict the assertions of the assessee with respect to aforesai .....

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8D without appreciating that no expenditure directly or indirectly was incurred during this year for earning exempt income and investments in shares were made in earlier years out of own fund and not out of borrowed found and hence disallowance u/s.14A r.w. Rule 8D may be deleted. 2. The learned CIT(A) failed to appreciate that dividend income is directly credited to Bank Account and appellant does not have to incur any expenditure for earning exempt income and hence disallowance u/s. 14A r.w. .....

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.O. to show that interest expense was not incurred for investment in shares or for earning exempt dividend income and A.O. did not reject the same and still A.O. applied Rule 8D in an automatic fashion and hence, no satisfaction was recorded by A.O. as required u/s 14A before invoking Rule 8D. 5. The learned CIT(A) failed to appreciate that disallowance u/s 14A read with Rule 8D cannot exceed exempt income. 6. Without prejudice to above, dividend received during this year is only ₹ 1,82,26 .....

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, therefore, no disallowance u/s 14A r.w. Rule 8D is to be made. 2.1. On the other hand, Shri Akhilendra Yadav strongly defended the conclusion arrived at by the ld. Commissioner of Income tax (Appeals) by contending that a well reasoned order has been passed by the ld. First Appellate Authority as apportionment of expenditure for earning the dividend income was done as per the provisions of the Act. It was pleaded that section 14A r.w. Rule 8D of the Rules is clearly applicable to the facts of .....

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y contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed ₹ 14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee .....

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essment year also, no borrowed funds were invested by the assessee for making investment in shares or for earning dividend income. At best, if any disallowance could be made that can be restricted to ₹ 1,485/- which were claimed as demat charges. Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income. In view of this fact, we find merit in the claim of the assessee. The appeal of the assessee is therefore, allowed. Finally, the appeal of the assessee is allowed. 2.2. It is noted .....

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n drawn in the aforesaid order of the Tribunal and peculiar facts of the present appeal, we are of the view, that at best, the disallowance may be restricted which cannot exceed the exempt income. We hold so. 3. So far as, the depreciation on V-SAT Line/Infrastructure at the rate of 15% instead of 60%, claimed by the assessee is concerned. It was explained by the ld. counsel that V-SAT is nothing but part of computer system, therefore, the claim of the assessee may be allowed. The ld. counsel pl .....

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tem on which higher rate of depreciation of 60% is allowable. The ld. DR did not controvert the assertion of the ld. counsel for the assessee. 3.1. We have considered the rival submissions and perused the material available on record. It is noted that identically, on the issue of depreciation, the Bench in the case of M/s Idea Cellular (ITA No.3847/Mum/2013), order dated 07/10/2015 held as under:- 3. The next ground pertains to deleting the addition of ₹ 15,01,908/- on account of excess cl .....

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t going into much deliberation, we are reproducing hereunder the relevant portion from the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) for ready reference:- I have considered the facts of the case and submissions of the assessee. The Assessing Officer has held that the UPS is only a device to provide power back and it is neither performing any of the functions of a computer and similarly other items are also not functioning as computer. Whereas, the assessee has claimed that .....

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9;ble Delhi High Court has held that UPS to be eligible for depreciation @ 60% in the case of Orient Ceramic and Industries Ltd. (supra). Hon ble ITAT has found printers, scanners and servers as integral part of computer system and entitled for deduction @ 60% in the case of Omni Globe Information Technologies India Pvt. Ltd. (supra). Similar is the decision of Hon'ble ITA T in the case of Expeditors In International (India) Pvt. Ltd. (supra) and Datacraft (India) Ltd. (supra). Therefore, re .....

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