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2016 (9) TMI 637 - ITAT MUMBAI

2016 (9) TMI 637 - ITAT MUMBAI - TMI - Disallowance under section 14A - Held that:- Disallowance of interest expenditure is concerned under Rule 8D(2)(ii), we find that, at the time of making the investment, the assessee had huge surplus/own funds available which far exceeded the investment made, therefore no disallowance of interest should be made. Accordingly, we direct the AO to delete the disallowance of interest. - As regards the disallowance of indirect expenditure under Rule 8D(2)(ii .....

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tances of the case and in the interest of justice, we are of the opinion that the disallowance should be scaled down and some estimate disallowance should be made, having regard to the nature of expenditure debited and the exempt income earned at ₹ 2,95,450/-. Accordingly, we hold that 10% of the dividend income would be reasonable for allocating the indirect expenditure for the earning of exempt income. Such an estimate is purely on the facts and circumstances of the case. Thus, grounds w .....

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der section 40(a)(ia) is called for. - ITA No. : 50/Mum/2013 - Dated:- 1-8-2016 - SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : Shri Bhupendra Karkhanis For The Respondent : Shri A Ramchandran PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against impugned order dated 19.10.2012, passed by Ld. CIT (Appeals)-8, Mumbai for the quantum of assessment passed under section 143(3) for the assessment year 2009- 10, on the followi .....

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in law, the learned Commissioner of Income-Tax(Appeals) erred in confirming the disallowance of proportionate interest u/s 14A read with rule 81)(2)(ii) of ₹ 7,09,975/- without appreciating that own funds are more than the investments in shares and as such no interest should be attributed to earn exempt income and the reason assigned for doing so are wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961 and the Rules made thereunder. c) On the facts and in the .....

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s of the case and in law, the learned Commissioner of Income-Tax(Appeals) erred in holding that even stock-in-trade have to be considered for disallowance u/s 14A read with rule 8D of the Income Tax Rules, 1962 and the reasons assigned for doing so are wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961 and the Rules made thereunder. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirmin .....

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₹ 2,95,450/- on account of dividend income. The Ld. Assessing Officer noted that, the assessee has not allocated any expenses towards earning of the exempt income and accordingly, he required the assessee to show cause as to why the disallowance under section 14A should not be made. In response, the assessee submitted that, interest paid is mainly for loans taken for fixed assets and working capital; and in the earlier year, that is, in the AY 2007-08, the Ld. CIT(A) has deleted the intere .....

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available with the assessee and, therefore, no disallowance of interest should be made. In support of his contention, he submitted that only 2 investments were made one in M/s Ajcon Commodities Progress Ltd., which was made in the financial year 1994-95 and secondly, Ajcon IT Firm Ltd., which was made investment in the financial year 2007-08. The relevant chart of investments made and availability of own funds as per the Balance sheet in the relevant year have been shown in the following manner .....

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Utilities and Power Ltd., reported in [2009] 313 ITR 340; and HDFC Bank Ltd., reported in [2014] 366 ITR 505. He further pointed out that, in any case the investment has been made in the subsidiary and associate company which are in the nature of strategic investments hence no disallowance of indirect expenditure should be made, because they were made for the purpose of business. He further submitted that, AO has also considered the stockin- trade while working out the income from investment fo .....

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evkant Synthetics (India (P.) Ltd. ITA No.s 2663 to 2665/M/2015 5 Interglobe Enterprises Ltd. v. DCIT ITA 1580/Del/2013 ITA 1362 & 1032/Del/2013 6 CIT v Oriental Structural Engineers Pvt Ltd. 216 Taxman.92 7 Garware Wall Ropes Ltd. v Addl.CIT ITA No.5408/Mum/2012 5. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 6. After considering the rival submissions and on perusal of the impugned orders, we find that so far as disallowance of interest expenditure is concerned un .....

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(2)(ii) of ₹ 1,79,134/-, we agree with the contention of the Ld. Counsel that, so far as the investment made in subsidiary and Associate Companies are concerned, they are by way of strategic investments and, therefore, same should not form part of the working of average value of investment while computing the disallowance. Accordingly, we hold that investments which have been made mostly by way of strategic investments and stock-in-trade should not rope in for the purpose disallowance. Loo .....

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of the case. Thus, grounds with regard to disallowance under section 14A are treated as partly allowed. 7. As regards the issue raised in ground No.2 regarding disallowance of ₹ 1,71,840/- on account of transaction charges paid to stock-exchange by invoking of the provisions of section 40(a)(ia) by the authorities below on the ground that, assessee has not deducted the tax at source under section 194J on such payments. We find that, the Ld. CIT(A) has decided the issue following the decis .....

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e nature of technical services but for facilities provided by the stock-exchange and accordingly, no TDS is deductible under section 194J. The relevant observation and finding of the Hon ble Supreme Court in this regard is as under:- 6. What meaning should be ascribed to the word technical services appearing in Explanation 2 to clause (vii) to Section 9(1) of the Act is the moot question. In Commissioners of Income-Tax Vs. Bharti Cellular Ltd.[1] this Court has observed as follows: Right from 19 .....

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s. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd. (supra). However, it cannot be lost sight of that modern day scientific and technological developments may tend to blur the specific human element in an otherwise fully automated process by which such services may be provided. The search for a more effective basis, therefore, must be made. 8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the ser .....

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ction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange. Technical services like Managerial and Consultancy service would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to .....

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of the expression technical services appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act. 9. There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) Syst .....

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ry transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the memb .....

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