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The Commissioner of Income-tax Versus M/s. Himatsingka Seide Ltd

Disallowance under section 14A - ITAT allowed the claim - Held that:- Once Rule 8(D) of the I .T. Rules, is held to be having prospective effect, naturally it could not be applied to the assessment year in question and therefore, the view taken by the Tribunal cannot be said to be erroneous nor it can be said that any substantial question of law would arise for consideration. No substantial question of law. - Disallowance of interest under section 36(1)(iii) - ITAT allowed the claim - Held t .....

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l has committed an error in deleting the disallowance made by the Assessing Officer or CIT (Appeals) of the amount of interest. No substantial question of law. - ITA NO. 229/2015 C/W ITA NO. 228/2015 - Dated:- 5-4-2016 - MR. JAYANT PATEL AND MRS. B.V.NAGARATHNA JJ. For the Appellant: Sri.K.V.Aravind, Advocate For the Respondent: Smt. Vani. H, Advocate JUDGMENT The appellant-Revenue has preferred the present appeals by raising the following substantial .....

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, the Tribunal is right in law in holding that the issue of disallowance under section 14A of the Act being sustained at 5% of exempted income i.e., ₹ 25,23,655/- does not call for any interference even when the assessing authority was correct in making disallowance under section 14A of the Act and the Commissioner of Income Tax (Appeals) had modified the same in the absence of proper reasonings? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is rig .....

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p> 2. We have heard Mr.K.V.Aravind, learned Counsel appearing for the appellants-Revenue and Ms.Vani H. , learned Counsel appearing for the respondent-assessee. 3. We may record that so far as question No.1 is concerned, learned Counsel for the appellant-Revenu e has not pressed the said question and therefore the said question would not arise in the present appeals. 4. So far as question No.2 is concerned, the Income Tax Appellate Tribunal (hereinafter referred to .....

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or the year under consideration i.e. Assessment Year 2007-08 but would be applicable w.e.f. 24.3.2008 i.e. for -and from Assessment Year 2008-09. In holding that a reasonable disallowance of 5% of exempted income i.e. ₹ 25,23,655 is to be made in respect of the expenditure incurred to earn such income, the learned CIT (Appeals) followed the decisions of the co-ordinate benches of this Tribunal in the case of ING Vysya Bank Ltd. in ITA No.589/Bang/2006 dated 23.4.2008 and the case of ACIT V .....

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ppeals) on this issue. Consequently both the grounds raised by revenue at S.No.5 to 7 and by the assessee at S.No.2 of its grounds of appeal are dismissed. 8. In the result, revenue s appeal is dismissed. 5. It may also be recorded that in the decision of the Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd., Vs. Deputy Commissioner of Income Tax & Anr. reported at (2010) 328 ITR 0081 , the view taken was that Rule 8(D) of the Income Tax Rules, (herein aft .....

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stion of law would arise for consideration. 7. However, Mr.K.V.Aravind, learned Counsel appearing for the appellants-Revenue did rely upon the decision of the Kerala High Court in the case of Commissioner of Income Tax Vs. Catholic Syrian Bank Ltd. & Ors. reported at (2012) 344 ITR 0259 and contended that though the said case was pertaining to assessment year 2007-08, the applicability of Ru le 8(D) of the I.T. Rules was accepted by Kerala High Court and therefore, a different vi .....

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sallowance is called for only under sub-s. (2) r/w r.8D of the IT Rules which came into force from 2007-08 onwards and the same cannot be applied for any earlier assessment year. 9. Therefore the judgment can hardly be said to be on the point decided for considering the applicability of Rule 8(D) of the I.T. Rules with retrospective effect as sought to be canvassed. Further, in any case, there is no consideration on the aspects of prospectivity or retrospectivity of Rule 8(D) of the .....

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ourt referred to hereinabove, we do not find that any substantial question of law viz., question No.2 would arise for consideration as sought to be canvassed. 11. On question No.3 the relevant discussion of the Tribunal from paras-10.5.1 to 10.5.3 read as under: 10.5.1 We have heard the rival submissions and perused and carefully considered the orders of the authorities below, the assessee s submissions and the material on record. From the details on record, it is seen th .....

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p> a) On Term Loan for Filate & Siede units ₹ 44,20,762 and b) On working capital for Filate & Siede units ₹ 50,803. Therefore the facts that the entire interest paid on the Term Loan taken for acquiring fixed assets for its new unit at Hassan has been capitalized as work-in- progress has evidently not been claimed as a revenue expenditure is, in our view, factually established. 10.5.2 We also find from the submissions of the learned .....

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not established with any material evidence that the loans advanced interest free by the assessee to its subsidiary, Himatsingka Wovens P.Ltd. were diverted to it by the assessee from out of the Term Loan taken by it from banks for the existing manufacturing units at Filate and Seide or from out of loans taken for working capital for its existing units at Filate and Seide. 10.5.3 In view of the established fact that the interest of ₹ 44,71,565 claimed by the assessee in its prof .....

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