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2016 (8) TMI 56 - ITAT MUMBAI

2016 (8) TMI 56 - ITAT MUMBAI - TMI - Addition u/s 14A - Held that:- As during the year under consideration, assessee has not earned any exempt income in order to invoke the provisions of section 14A of the Act. Thus we find no reason to uphold the impugned disallowance made by the income tax authorities by invoking section 14A of the Act - Decided in favour of assessee - Addition invoking the provisions of section 36(1)(iii) - Held that:- Following the judgment of Hon'ble Bombay High Court .....

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he fact position brought out by the CIT(A), the proposition laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities And Power Limited(supra) is fully attracted in the present case. Such fact-situation has been enumerated by the CIT(A) in Para 3.4 of his order, which depicts the summarized fund flow position of the assessee, and the same has not been controverted by the Revenue before us, rather the same is also borne out of the material placed in the Paper Book filed before .....

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2008-09 are directed against an order passed by Ld. CIT(A)-14, Mumbai dated 27/12/2011, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 18/03/2010. The Grounds of appeal raised by the assessee as well as the Revenue read as under:- Assessee s Grounds of Appeal: On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)- 14 (CIT(A)): Disallowance unde .....

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ith section 14A(2) of the Act cannot be invoked, in absence of any satisfaction by the learned Assessing Officer under section 14A(1) of the Act read with Rule 8D(1) of the Rules; 3. without prejudice to the above, should have appreciated that only the investments on which exempt income is earned during the year, should be considered while computing disallowance under rule 8D; 4. without prejudice to the above, should be directed to restrict the disallowance to a nominal amount as no dividend wa .....

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aw, the Ld. CIT(A) erred in not appreciating the fact that the borrowed funds were utilized for the purpose of non-business purposes and also the assessee could not prove before the Assessing Officer that the investment was made out of own funds." 3 "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored". 2. The assessee is a company incorporated under the provisions of the Companies Act, 1956, and is, inter-al .....

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nging the order of the CIT(A) on respective Grounds of appeal. 3. In so far as the assessee s appeal is concerned, although multiple Grounds have been raised, but the solitary grievance is with regard to the action of the CIT(A) in sustaining the disallowance of ₹ 33,93,829/- under section 14A of the Act . 3.1 In this regard, brief facts are that the Assessing Officer noted that assessee had invested in shares, which would yield exempt income and, therefore, according to him the disallowan .....

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onstruction and real estate business; that the investments were in the shares of a Private Limited Company, where of the gain on sale of such shares would result in taxable income; that in any case, investments were in subsidiary concerns, which were strategic investments for business purposes; and, that no exempt income by way of dividends was earned during the year under consideration. All the aforesaid reasons were canvassed by the assessee to support its assertion that disallowance under sec .....

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ame. 7. We have carefully considered the rival submissions. Pertinently, in this case, the primary plea of the assessee has been that during the year under consideration, it has not earned any exempt income in order to invoke the provisions of section 14A of the Act. In this context, the Ld. Representative for the assessee has placed reliance on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Delite Enterprises, ITA NO.110 of 2009 dated 26/02/2009, wherein non-applicatio .....

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on 14A of the Act. Accordingly, the disallowance of ₹ 33,93,829/- sustained by the CIT(A) is hereby directed to be deleted. Thus, on this aspect, assessee succeeds. 8. In the result, appeal of the assessee is allowed. 9. In so far as cross appeal of the Revenue is concerned, the solitary issue relates to action of the CIT(A) in deleting an addition of ₹ 53,07,260/-, which was made by the Assessing Officer by invoking the provisions of section 36(1)(iii) of the Act. 9.1 In this contex .....

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er that on being asked to furnish any nexus between the funds utilized and investments, the assessee failed to do so. The Assessing Officer further noticed that after raising of borrowed funds from L&T Infrastructure Finance Company Ltd. on 8/01/2008, assessee had made two investments namely,(i) Alspon Infrastructure- ₹ 10,60,00,000 on 25,26,27/3/2008; and (ii)Ashford Infotech (P) Ltd.- ₹ 50.00 crores on 25/02/2008. The Assessing Officer worked out proportionate interest on such .....

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assessee raised various submissions on facts and in law. The assessee pointed out that a sum of ₹ 50.00 crores was given to its subsidiary Ashford Infotech (P) Ltd by way of share application money and such subsidiary was also engaged in the business of construction and development of real estate. For the said reason, it was canvassed that such investment was for furtherance of assessee s business, following the ratio of the decision of the Hon'ble Supreme Court in the case of S.A. Bu .....

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the effect that its total shareholder funds, which were free of interest, were in excess of the impugned investments and, therefore, following the ratio of the judgment of the Hon'ble Bombay High Court in the case of CIT. Vs. Reliance Utilities And Power Limited.,313 ITR 340(Bom), it was to be presumed that such investments are out of non-interest bearing funds, and, thus no interest was disallowable. The CIT(A) accepted both the pleas set up by the assessee and has deleted the addition. 12 .....

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