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Sh. Gagan Goyal Versus JCIT, Range-24, New Delhi

2016 (9) TMI 207 - ITAT DELHI

Disallowance u/s 14A - Held that:- As assessee was having own funds which were more than the investment made and therefore, no disallowance under section 14A is sustainable in the eyes of law. - Decided in favour of assessee. - Adhoc disallowance made by the AO in respect of 1/6th of expenses - Held that:- CIT(A) while recording his finding has pointed out that AO had made the disallowance without pointing out any specific defects in the books of accounts. Despite that he only allowed the cl .....

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Delhi relevant to assessment year 2011-12 on the following grounds:- 1. On the facts and circumstances of the case, the order passed by the Ld. CIT(A) is bad, both in the ye of law and on the facts. 2 (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of ₹ 1,41,991/- made by AO by invoking the provisions of Rule 8D read with Section 14A of the Act. (ii) That the above-said disallowance has been conf .....

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elfare expenses 47,875/- Total 9,04,574/- (ii) That the above disallowance has been confirmed rejecting the contention of the assessee that the expenses have been incurred wholly and exclusively for the purpose of business. (iii) That the disallowance has been confirmed despite the same having been made most arbitrarily at the rate of 1/6th without there being any basis for the same. 4. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. The brief facts of the case .....

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ing the year under consideration. The AO s observation was that assessee debited a sum of ₹ 4,91,293/- in the profit and loss account under the head interest on unsecured loans (Rs. 632306/-) on bank loans (Rs. 383713), other interest (Rs. 475274). The assessee had also made substantial investment in various mutual funds during the year under consideration and a dividend amount of ₹ 64,689/- was reflected in the capital account of the assessee. The AO asked the Assessee to show cause .....

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s of Rule 8D of the I.T. Rules and made the disallowance of ₹ 1,41,991/- and also made adhoc disallowance of ₹ 1,77,892/- being 1/6th of total expenses of ₹ 10,67,353/- on account of vehicle running and maintenance expenses, telephone expenses, travelling expenses and entertainment / staff welfare expenses by computing the total taxable income of the assessee at ₹ 21,20,580/- as against the return income of ₹ 16,22,870/- vide his order dated 26.12.2014 passed u/s. 1 .....

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that own funds held by the assessee were more than the investment made and accordingly no disallowance under section 14A can be made. To support his contention, he relied upon the following case laws and stated that the issue in dispute is squarely covered by the said decisions. - CIT vs. Taikisha Engineering Ltd. (Delhi High Court) ITA No. 115/2014 & 119/2014 dated 25.11.2014. - CIT, Mumbai Versus HDFC Bank Ltd. (Bombay High Court) ITA No. 330 of 2012 dated 23.7.2014. - CIT vs. Suzlon Energ .....

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stated that the above disallowances has been made without any basis. These disallowance have been made despite the fact that these expenses have been incurred for the purpose of business and profession. To support his contention, he relied upon the following case laws and stated that the issue in dispute is squarely covered by the said decisions. - ACIT vs. Amtek Auto Ltd. 112 TTJ 455 - DCIT vs. Yash B. Johar, ITA No. 2612/Mum/2008 AY 2004- 05 dated 5.2.2010. - Devji Nenshi Palani vs. ITO ITA No .....

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and he is incurring interest expenses and claiming the same as business expenses, hence, the disallowance of ₹ 1,41,991/- was rightly made and needs to be affirmed. Ld. DR further stated on the disallowance of ₹ 1,50,763/ on account of various expenses, the assessee has not furnished any evidence to prove that these expenses were incurred wholly and exclusively for the purpose of business. He further stated that therefore, the AO has rightly made the aforesaid disallowance which need .....

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decisions:- CIT Vs Taikisha Engineering India Ltd. (Delhi High Court) ITA 115/2014 & 119/2014 dated 25-11-2014 Disallowance of expenses on exempt income uls 14A r.w Rule 80 - investments in shares and mutual funds - Held that:- In Maxopp Investment Ltd. vs. Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] it has been held that it is only when the AO is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed - .....

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o examine whether the assessee has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt - the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii) - Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to .....

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e. 7.1 In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, the disallowance made by the AO and confirmed by the Ld. CIT(A) is deleted and the issue in dispute raised by the Assessee is allowed. 8. With regard to second addition in respect of adhoc disallowance made by the AO in respect of 1/6th of the aforesaid expenses as mentioned in a tabulation form in para 5.1 of this order is concerned, I find that Ld. CIT(A) while recording his finding h .....

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