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2016 (7) TMI 620

Disallowance u/s 14A - apportionment of expenses - Held that- We find that the total expenses debited to profit and loss account is ₹ 2,28,25,154/- and out of this, direct expenses of consultancy and professional charges amounting to ₹ 1,96,48,885/- for earning consultancy income i.e taxable income would be automatically out of the purview of computing disallowance u/s 14A of the Act. The remaining common expenses of ₹ 31,76,269/- have to be apportioned between taxable and non- .....

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ce u/s 14A . Hence we hold that the Learned AO has got sufficient powers to substitute the disallowance figure at ₹ 14,45,202/- in terms of section 14A(2) of the Act itself and hence Rule 8D need not be followed in the facts of the instant case. - Decided partly in favour of assessee. - ITA.2530/Kol/2013 - Dated:- 8-7-2016 - Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM For The Appellant : Shri G.Sugla, Advocate For The Respondent : Shri Tanuj Kr.Neogi, JCIT Sr.DR ORDER Per Shri M.Bal .....

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s substantial amount of investment in shares from which it had earned considerable dividend income and accordingly sought to invoke the provisions of section 14A of the Act. The Learned AO observed that the assessee had voluntarily made disallowance u/s 14A of the Act to the tune of ₹ 5,92,667/- . He held that the assessee ought to have invoked the provisons of Rule 8D for the purpose of making disallowance u/s 14A of the Act and accordingly arrived at the disallowance u/s 14A figure at &# .....

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sed from time to time in consideration of payment by the company. 4. The Learned AR stated that this clause is mandated on the assessee to render the aforesaid services in order to derive its management consultancy income of ₹ 2,40,00,000/-, whereas the Learned CITA erroneously applied the same in the reverse direction by holding that the aforesaid services were provided to the assessee company for its investment decisions and accordingly held that the consultancy charges debited in its pr .....

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4A of the Act. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. For that on the facts and under the circumstances of the case the learned Commissioner of Income-Tax (Appeal) erred in confirming the addition of ₹ 58,77,703/- made by the assessing officer on account of disallowance of expenses u/s. 14A of the Income-Tax Act. 2. For that on the facts and in the circumstances of the case the learned Commissioner of Income-Tax (Appeal) erred in not accepting appellan .....

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e made by the assessee in the return is not in accordance with the statute and is only on an adhoc basis and accordingly prayed for non-interference in the order of the Learned AO. 6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find that the assessee had derived dividend income during the year under appeal to the tune of ₹ 2,24,97,711/- from five mutual funds and from four domestic companies. The Learn .....

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3,02,565/- was apportioned towards investment activity at 45.5% and disallowance u/s 14A of the Act to the tune of ₹ 5,92,667/- was made. We find that in the immediately preceding asst year 2009-10, the Learned CITA had given a direction to the Learned AO to recalculate the disallowance of expenses made u/s 14A after reducing the direct expenditure of consultancy fees from the total expenses claimed by the assessee in the profit and loss account and thereafter restrict the disallowance of .....

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ce. We direct the Learned AO accordingly. 6.2. We hold that the Learned AO cannot mechanically apply the provisions of Rule 8D for the purpose of disallowance u/s 14A of the Act. In our opinion, the same could be used only as a last resort only in the event of the AO not able to make a fair substitution of the disallowance figure as contemplated u/s 14A(2) of the Act. In any case, the provisions of the Act would always prevail over the Rules as admittedly the Rules are only subordinate piece of .....

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