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2016 (5) TMI 462 - ITAT MUMBAI

2016 (5) TMI 462 - ITAT MUMBAI - TMI - Disallowance under section 14A - AO has computed the disallowance under section % on the average investment as on the opening balance and closing balance of investments of the relevant period - Held that:- As observed by the learned CIT(A), while interest expenditure has been incurred on funds invested in the capital of firms from where the assessee has received both taxable income in the form of interest income and remuneration, the assessee would have al .....

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30-3-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : Shri M. Subramanian Respondent : Shri G.M. Doss ORDER Per Jason P. Boaz, A.M. These three appeals by the assessee are directed against the orders of CIT(A)-1, Thane dated 23.10.2013 for assessment years 2008-09 to 2010-11. These appeals, having interconnected issues, were heard together and are being disposed off by way of this common order. 2. In these appeals, the assessee has raised .....

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ed u/s 143(3) r.w.s. 153A of the I.T. Act is invalid and bad in law. 2. On the facts and in the circumstances of the case and in law, the, learned CIT(A) erred in sustaining disallowance to the extent of ₹ 4,27,477/- made u/s 14A of the I.T. Act. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the A.O. in computing the House Property income at ₹ 71,400/-. 2.3 For A.Y. 2010-11 1. On the facts and in the circumstance .....

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e outset, the learned A.R. for the assessee submitted that only ground No. 2 are being urged in these appeals and all other grounds are not being pressed. In view of this, ground No. 1 for A.Y. 2008-09 to 2010-11 and ground No. 3 for A.Y. 2009-10 and 2010-11 are not pressed and consequently being rendered infructuous are accordingly dismissed. 4. Ground No. 2 - Disallowance under section 14A of the Act 4.1 The facts of the case on this matter, as emanate from the record, are that the assessee is .....

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o tax as business income under section 28(v) of the Act and that interest paid on borrowed funds were allowable as deduction therefrom. The AO did not accept the assessee s claim as he was of the view that the main objective of the assessee for being a partner in the firm was to earn share of profits as partner therefrom which are exempt under section 10(2A) of the Act. The AO was also of the view that, since it is difficult to establish the nexus of borrowed funds invested in the firms with tha .....

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#8377; 95,13,560/- Rule 8D(2)(iii) ₹ 5,56,860/- 4.2 On appeal before the learned CIT(A), the assessee, inter alia, contended that the provisions of section 14A of the Act were not applicable in the case on hand since (i) no expenses had been incurred for earning of share of profits from the firms, exempted under section 10(2A) of the Act. In support of the proposition, that since no portion of the interest expenditure, sought to be disallowed under section 14A, relates to share in profits .....

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ious companies, interest earned on capital invested in the firms and remuneration received from firms, constituting business income under section 28(v) of the Act. In support of this proposition, the assessee placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Delite Enterprises (supra). In support of the proposition that interest on borrowed capital for the purpose of investment in firms is allowable against remuneration received by the partner from the firms .....

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essee s share in the profits from firms. The learned CIT(A) consequently held that no disallowance could be made out of interest expenditure on borrowed funds invested in the firms to the extent of interest earned from investment in such firms. In this view of the matter, the learned CIT(A) recomputed and deleted/reduced the disallowance made by the AO under section 14A read with Rule 8D(2)(ii) as under: - A.Y. Disallowance (Rs. ) Disallowance Deleted/Reduced (Rs. ) Disallowance Confirmed (Rs. ) .....

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09 to 2010-11 as laid out at para 4.1 of this order (supra). This is the subject matter of the appeals for all the three years involved. 4.3.1 We have heard the learned A.R. for the assessee at length in the matter of disallowance under section 14A read with Rule 8D(2)(ii) reiterating the submission put forth before the learned CIT(A) and as summarised by us at para 4.2 of this order (supra). Accordig to the learned A.R. for the assessee, the disallowance of ₹ 26,66,738/- sustained by the .....

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in view of the decision of the Coordinate Benches in the case of Sudhir Dattaram Patil (supra) and Delite Enterprises (supra). The learned D.R. on his part placed reliance on the findings in the impugned order. 4.3.2 We have heard the rival submissions and perused and carefully considered the material on record on record; including the judicial pronouncements cited and relied upon. The matter for adjudication before us is with respect to the disallowance under section 14A read with Rule 8D(2)(ii .....

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r the purpose of investment in firms against remuneration of ₹ 80,00,000/- received by the partner from the firms which was exigible to tax under section 28(v) of the Act, as has been held by the Coordinate Bench in the case of Sudhir Dattaram Patil (supra). If this exercise had been carried out, and the balance interest of ₹ 26,66,738/- had been set off against the remuneration of ₹ 80,00,000/- no disallowance under section 14A read with Rule 8D(2)(ii) would have been called f .....

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earned CIT(A) for A.Y. 2008- 09 (viz. ₹ 1,88,704/-), for A.Y. 2009-10 (viz. ₹ 4,27,477/-) and for A.Y. 2010- 11 (Rs. 5,56,860/-), the learned A.R. for the assessee submitted that no disallowance under section 14A was called for as the share of profits received by the assessee from firms, which was exempt under section 10(2A) of the Act was received by the assessee only after all expenditures incurred in earning the said profit had been debited and taxes thereon had been paid. Per con .....

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