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JHP Securities Ltd. Versus The Asst. Commissioner of Income Tax, Range-4 (3) , Mumbai

2016 (9) TMI 1211 - ITAT MUMBAI

Addition u/s 14A - Held that:- We noted from the above facts that the assessee before the CIT (A) has demonstrated from the balance sheet that it was having interest funds available with it for investment in shares. The AO or the CIT (A) has nowhere proved the nexus of tax free income generated out of investments made from interest bearing funds, despite the fact that the entire facts were available before them. The assessee has reasonably demonstrated before us that the interest free funds i.e. .....

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e both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. - Decided in favour of assessee - Disallowance of depreciation on motor car - car is registered in the name of one of the directors and legal ownership is not in the name of the Assessee Company - Held that:- We find from the facts of the case t .....

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le and purchasing of motor vehicle for valuable consideration from assessee’s account and using the same for the business purpose, depreciation cannot be denied on the ground that the vehicle was not registered in assessee’s name”. Following the above decision of the Hon’ble Bombay High Court in the case of Dilip Singh Sardarsingh Bagga (supra) we allow the claim of the assessee. - ITA No.192/Mum/2015 - Dated:- 18-8-2016 - SRI MAHAVIR SINGH, JUDICIAL MEMBER AND SRI MANOJ KUMAR AGGARWAL, ACCOUNTA .....

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inst the order of the CIT (A) confirming the disallowance of expenses relatable to exempted income by invoking the provisions of Section 14A of the Act read with Rule 8D (2) (ii) of the Income Tax Rules, 1962 (hereinafter the Rules ) at ₹ 10,49,330/-. 3. Briefly stated facts are that the assessee has earned dividend income of ₹ 3,95,624/- and claimed the same as exempt. Admittedly, this income does not form part of the total income. The AO by invoking the provisions of Section 14A of .....

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form part of the total income as appearing in the Balance Sheet of the assessee, on the first day and the last day of the previous year. 0.5/100*13,11,61,235.60 6,55,806.18 Total Expenditure disallowed u/s. 14A 11,02,270.96 Aggrieved, the assessee preferred appeal before the CIT (A). Before the CIT (A) the assessee contended that during the previous year relevant to this assessment year an aggregate amount of ₹ 1,03,32,925/-was invested in the shares of Indian Companies and an amount of &# .....

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earned dividend income. It was also explained by the assessee that current year s profit was to the tune of ₹ 2,39,17,686/-. Before the CIT (A) the assessee also contended that the AO has not dealt with the submissions of availability of funds and investment in shares vis-à-vis the nexus of investment. According to him, the AO applied Rule 8D of the Rules mechanically and without recording of any satisfaction. The learned Counsel for the assessee before the CIT (A) also relied on th .....

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ngs, it was submitted that average value investment has been wrongly computed by the AO. The AR of the appellant submitted that correct figure should be ₹ 1,05,88,208/- as against a sum of ₹ 13,11,61,235/- adopted by the AO. The AO is accordingly directed to verify this fact and adopt correct figure of average investment and thereafter, recomputed the disallowance accordingly. This ground of appeal is, thus treated as partly allowed . Aggrieved, the assessee is in second appeal befor .....

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sonably demonstrated before us that the interest free funds i.e. assessee s own share capital as well as reserves and surplus is more than ₹ 20 Crores as against the investments in shares that gave tax free income at ₹ 1.03 Crores which is much more lower than the interest free funds available. Hence, this being the position, we are of the view that the assessee s case is squarely covered by the decision of the Hon ble Bombay High Court in the case of HDFC Bank Ltd. (supra) wherein t .....

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lar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to .....

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ufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissi .....

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rs and legal ownership is not in the name of the Assessee Company. 6. We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, the AO was of the view that motor car is declared by the assessee in its balance sheet and in the schedule of fixed assets. It is also admitted position that the funds utilized for purchase of the car is out of assessee s accounts. Only reason for disallowance was that the car was purchased in the name of the director of t .....

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