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The Commissioner of Income Tax-5, Mumbai Versus Suremi Trading Private Ltd.

2016 (10) TMI 249 - BOMBAY HIGH COURT

Disallowance of expenditure at 5% of exempted income under Section 14A - Held that:- We find that the impugned order of the Tribunal has not disturbed the order of the Commissioner of Income Tax (Appeals), who while applying the test of reasonable disallowance, disallowed the expenditure at 5% of the exempted income. This was by following the decision of the Tribunal in M/s. VIP Industries Ltd. vs. DCIT. [2010 (9) TMI 1097 - ITAT MUMBAI ]. Thus, the disallowance under Section 14A of the Act is r .....

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e grievance of the Revenue that the amount paid to M/s. Mafatlal Industries Ltd. is not reimbursement of expenses. We were inclined to restore this issue to the Tribunal for fresh consideration. However, the Counsel for the Revenue resisted a remand at this stage and expressed a view that at the final hearing he would be able to succeed before this Court without a remand. - Appeal admitted on question :- Whether on the facts and in the circumstances of the case and in law, the Tribunal is ju .....

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This appeal under Section 260A of the Income Tax Act, 1961 ( the Act ) challenges the order dated 17 September 2013 passed by the Income Tax Appellate Tribunal ( Tribunal ). 2. The impugned order relates to Assessment year 2007-08. 3. The Revenue has urged the following two questions of law for our consideration: (A). Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified in by stating that Rule 8D is not retrospective in nature and 5% of disallowance u/s .....

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el appearing for the Revenue, states that the question as formulated raises two issues - one with regard to invoking of Rule 8D of the Income Tax Rules 1961 (the Rules) while computing the disallowance of expenditure under Section 14A of the Act for the Assessment Year 200708 and second the disallowance of expenditure under Section 14A of the Act at 5% on reasonable basis. (ii) So far as the first issue is concerned, Mr. Ahuja fairly states that it stands concluded against the Revenue by the dec .....

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ture at 5% of exempted income under Section 14A of the Act by the impugned order is inadequate on the touchstone of reasonable disallowance as mandated by Godrej & Boyce Mfg. Co. Ltd. (supra). In particular, it is submitted that for the Assessment Year 2008-09, the Assessing Officer has made a disallowance of the expenditure to the extent of 15% of the exempted income. In the above view, it is submitted that for this Assessment Year also reasonable disallowance would be 15% of exempted incom .....

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(v) We find that the impugned order of the Tribunal has not disturbed the order of the Commissioner of Income Tax (Appeals), who while applying the test of reasonable disallowance, disallowed the expenditure at 5% of the exempted income. This was by following the decision of the Tribunal in M/s. VIP Industries Ltd. vs. DCIT. ITA No.7242/Mum/2008 Thus, the disallowance under Section 14A of the Act is reasonable in the absence of the Revenue showing the same to be perverse. (vi) In the above view .....

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