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Income-tax Officer, Wd-8 (4) , Kolkata Versus M/s. Soyuz Trading Co. Ltd.

2015 (10) TMI 2511 - ITAT KOLKATA

Expenditure on account of consultancy fee disallowable u/s. 14A - as observed that the assessee had considerable business income from management consultancy during the relevant year and majority of expenses were incurred by the company for earning such business income - CIT(A) deleting the expenditure on account of consultancy fee as not disallowable u/s. 14A oHeld that:- While applying Rule 8D(2)(ii), the AO should have excluded those expenses which were directly attributable to consultancy bus .....

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jor expenses were incurred by the assessee for earning such income and collection of dividend cheque. Similarly, in respect of long term capital loss of ₹ 3,97,694/- there were only two transactions for purchase and sale of shares and two for investment and redemption of units of mutual fund which too were transacted over telephone through the broker/bank. No separate staff was employed for this purpose and extra expenses were incurred for such transactions. - Decided against revenue - I.T .....

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vide its order dated 22.11.2011. 2. The only issue in this appeal of revenue is against the order of CIT(A) deleting the expenditure on account of consultancy fee of ₹ 46.10 lacs as not disallowable u/s. 14A of the Act. For this, revenue has raised following two grounds: 1. That, on the facts and in circumstances of the case and in law, the CIT(A) erred in allowing relief to the assessee company in holding that expenditure of consultancy fee of ₹ 46,10,000/- was in respect of earnin .....

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ions of the Act. 3. Briefly stated facts are that the AO during the course of assessment proceedings noticed that it has earned dividend income of ₹ 1,66,06,788/- and long term capital loss of ₹ 3,97,694/- which does not form part of taxable income but assessee has not attributed any expenditure towards this except ad hoc disallowance of ₹ 2,60,221/- offered u/s. 14A of the Act. Accordingly, he observed that as is evident from the above submission, the assessee has not denied o .....

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the disposal of the assessee have remained so invested during the previous years 2007-08 and 2008-09 respectively. The total value of investment on the first day and the last day of the current previous year 2008-09 as appearing in the balance sheet are ₹ 97,86,43,112/- and 101,56,18,232/- respectively. It would not be overemphasized to say that investment decisions are very complex in nature. The investment requires availability of funds and consequential blocking of funds, besides, inve .....

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ch volume of investment activity and for that matter, in relation to the income which does not form part of the total income. Accordingly, he made disallowance of ₹ 49,85,653/- by applying the provisions of section 14A of the Act read with Rule 8D(2)(iii) of the I. T. Rules, 1962 as under: The average of value of Investment = (Rs.97,86,43,112 + ₹ 101,56,18,232)/2 = ₹ 99,71,30,672/- Disallowance u/s. 8D(2)(iii) = 0.5% of ₹ 99,71,30,672/- = ₹ 49,85,653/- 4.5. as the a .....

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see preferred appeal before CIT(A), who deleted the disallowance by observing in para 5.1.4 as under: 5.1.4. After carefully considering the submission of the appellant along with the supporting details/evidences, perusing the facts of the case and the observation of the AO and other materials on record, I find substantial force in the argument put forward by the appellant. I agree with the argument of the A/R that the direct expenses incurred for earning the taxable income, in any case, cannot .....

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e time, I am of the view that the disallowable expenses cannot exceed the total expenses claimed by an assessee during a year as has been held by the Hon'ble Delhi High Court and other High Courts of India. In the light of the above discussion & observation, perusing the entire facts of the case, the AO is directed firstly to modify/recalculate the disallowance of expenditure made uls. 14A of the Act after reducing the direct expenditure of consultancy fees of ₹ 46,10,000/- from th .....

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- and long term capital loss of (Rs. 3,97,694/-) which do not form part of taxable income. The assessee has not denied of incurring expenditure in relation to dividend income, which does not form part of the total income, but has offered only an ad hoc disallowance of ₹ 2,60,221/- u/s. 14A of the Act. We find that about 98.60% and 88.90% of the total funds at the disposal of the assessee remained invested in shares during the previous years 2007-08 and 2008-09 respectively. Thus, the total .....

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taxable income. In support its contention, the appellant furnished the details of such expenses and working of the disallowable expenditure arrived at ₹ 2,60,221/- as above. It is observed that the assessee had considerable business income from management consultancy to the extent of ₹ 73,50,000/- during the relevant year and majority of expenses were incurred by the company for earning such business income. Before us it was explained that for earning the management consultancy fees .....

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