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2016 (9) TMI 748 - ITAT DELHI

2016 (9) TMI 748 - ITAT DELHI - TMI - Disallowance under the provisions of Section 14A - benefit of deduction u/s 10A - Held that:- It is an admitted fact that the AO while making the disallowance invoked the provisions contained in Section 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962, the provisions contained in Rule 8D are applicable w.e.f assessment year 2008-09. In other words, the provisions of Rules 8D are not applicable to the year under consideration which is the assessment yea .....

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irectly related to earn the exempt income during the year relevant to the assessment year under consideration i.e. assessment year 2007-08, if there is any increase in the business profit after making the disallowance then the benefit of deduction u/s 10A of the Act if available in accordance with law to the assessee is to be given. - Decided in favour of assessee for statistical purposes. - ITA No. 5522/Del/2011 - Dated:- 8-8-2016 - Sh. N. K. Saini, AM and Smt. Beena Pillai, JM For The Assessee .....

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the assessment of the appellant at an income of ₹ 24,909,651 as against the original returned income of ₹ 20,799,325. 1.2 That on the facts and circumstances of the case and in law, the AO / Dispute Resolution Panel ("DRP") has erred in making a disallowance of ₹ 3,725,040 under the provisions of section 14A of the Income-tax Act, 1961 ("Act"). 1.3 That on the facts and circumstances of the case and in law, the AO / DRP has erred in not accepting the content .....

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the tax exempt dividend income on account of common administrative, managerial and infrastructural setup. 1.5 That on the facts and circumstances of the case and in law, the AO / DRP has erred in attributing and disallowing, under section 14A of the Act expenses @ 0.5 percent of the average value of the investments held by the appellant in an ad-hoc manner. 1.6 Without prejudice to the above grounds, that the AO / DRP has erred in not allocating the amount of disallowance under section 14A, prop .....

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es of the case and in law, the AO has erred in levying interest under section 234D of the Act. The above grounds are independent and without prejudice to each other. The appellant craves, leave to add, alter, amend or withdraw any ground of appeal at or before the time of hearing. 3. Ground No. 1 is general in nature, Ground No. 1.7 is was not pressed so these grounds do not require any comment on our part. 4. Vide Ground Nos. 1.2 to 1.6, the grievance of the assessee relates to the disallowance .....

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34) of the Act. The AO was of the view that the provisions of Section 14A of the Act were applicable in the case of the assessee. He, therefore, asked the assessee to explain as to why proportionate expenses should not be attributed towards such income/investment u/s 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962. The assessee submitted as under: The company has earned a dividend income of ₹ 1,00,14,573/- from the investment in equity oriented units of mutual fund. The dividend inc .....

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edings Ltd. Vs DCIT 107 ITD 267 (ITAT Del.) Ø Maruti Udyog Ltd. Vs DCIT 92 ITD 119 (ITAT Del.) Ø CIT Vs Hero Cycles Ltd. 189 Taxman 50 (P&H) The AO did not find merit in the submissions of the assessee. 7. The assessee also raised the objection before the ld. DRP and submitted that the assessee had not incurred any expenditure to earn this income. Therefore, the AO was not justified in disallowing any sum u/s 14A of the Act. It was also stated that the Rule 8D of the Income Tax .....

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2.8 of the impugned order as under: 2.7 It is pertinent to mention that the assessee is having common infrastructure and common personnel for earning income under various heads. Thus, the company is also using its administrative Managerial and infrastructural set up for earning income, which does not form part of total income under the Act. The company is incurring expenditure in quality manpower both administrative and managerial, which takes the crucial and complicated decisions regarding the .....

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thinks is incurred for earning exempt income. Thus, the claim of the assessee regarding expenditure in relation of income which does not form part of total income is not acceptable. Therefore, expenses are disallowed u/s 14A of ₹ 37,25,040, which works out @ 0.5% on the average investment of ₹ 7450.08 lacs as per balance sheet and same are added back to the assessee income. 9. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the .....

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placed on the following case laws: Ø iNautix Technologies India (P.) Ltd. Vs ACIT (2015) 42 ITR(T) 324 (Chennai Trib.) Ø CIT Vs Gem Plus Jewellery India Ltd. (2011) 330 ITR 175 (Bom) Ø Maxopp Investment Ltd. Vs CIT (2011) 15 Taxmann.com 390 (Del.) 10. In his rival submissions the ld. DR strongly supported the order of the AO and further submitted that the assessee earned the exempted income. Therefore, the provisions of Section 14A of the Act were applicable and since the a .....

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