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2016 (10) TMI 345 - ITAT DELHI

2016 (10) TMI 345 - ITAT DELHI - TMI - Disallowance u/s 14A r.w.r 8D - Held that:- AO invoked provisions of Rule 8D of Income Tax Rules, 1962 for making and estimating disallowance. Therefore the basis of disallowance was not correct and bad in law as Rule 8D applies from asstt. year 2008- 09 onwards. - Thus we inclined to hold that no material has been brought on record by the AO to show that the interest expenditure was incurred for the purpose of investment earning exempt income. At the .....

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total income. Therefore, we decline to accept basis adopted by the AO for making disallowances. - Per contra, at the same time we are in full agreement with the conclusion of the Ld. CIT(A) wherein he restricted the disallowance u/s 14A of the Act to the ratio of the dividend income to total income of the assessee during the relevant financial period. Hence we are unable to see any valid reason to interfere with the conclusion of the first appellate authority on this issue and thus we uphold .....

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ya Kapoor, Adv ORDER Per Chandra Mohan Garg, Judicial Member These appeals have been filed by the revenue against the order of the Commissioner of Income-Tax (Appeals)-XXIV, New Delhi in appeal No. 216, 215/13-14 for asstt. year 2006-07 to 2007-08 respectively both dated 26.11.2013. 2. Grounds raised by the revenue in ITA No. 1034/Del/2014 for the asstt. year 2006-07 read as under :- 1. On the facts & in the circumstances of the case, the Ld. CIT(A) has erred in restricting the disallowance .....

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the disallowance of ₹ 89,30,000/- made by the AO u/s 14A of the Income Tax Act 1961 ( for short the Act) to ₹ 1,46,397/-. Ld. DR vehemently contended that as per facts and circumstances of the case Ld. CIT(A) has erred in restricting the disallowance ignoring the fact that Rule 8D of the IT Rules 1962 could not be applied since the same was not applicable in the assessment year in question. 4. Replying to the above the Ld. Counsel for the assessee submitted copy of the assessment or .....

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t in restricting the addition to the suo moto disallowance of the assessee. Ld. Counsel also pointed out that in the relevant assessment year 2006-07 and 2007-08 Rule 8D of the Income Tax Rules 1962 is not applicable. Therefore the basic terms and provision of the AO on which disallowance was made was not valid and sustainable. 5. On careful consideration of our submissions from the relevant operative part of the assessment order we observe that the AO invoked provisions of Rule 8D of Income Tax .....

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unds (with growth option) has gone to ₹ 191,33,20,101/- as on 31.03.2006 in comparison to the investments of ₹ 1,97,97,88,755/- as on 31.03.2005 . Thus there was an decrease in the investments of ₹ 6,64,68,654. During the relevant assessment year, the appellant has claimed to have made investments in mutual funds from its own internal sources and no interest bearing fund was used by the appellant for investments. It is also seen that during the relevant assessment year, the app .....

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been brought on record by the Assessing Officer to show that the interest expenditure was incurred for the purposes of investments. Further, during the course of assessment proceedings, the appellant had claimed before the Assessing Officer of incurring expenditure of ₹ 1,46,397/- for the purposes of earning exempt income. No material has been brought on the record by the Assessing Officer to show that the aforesaid claim of expenditure to be disallowed suo moto by the appellant was eithe .....

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n 14A in relation to income not forming part of the total income by inserting Rule-8D in the Income-tax Rules. Thus during the relevant assessment year 2006-07, there was no rule prescribed for making the disallowance u/s 14A of the I.T.Act. As discussed above, Rule 80 of the I.T.Rules is applicable from 01.04.2008 and it has no retrospective application as held by the Hon'ble High Court of Mumbai in the case of Godrej Boycee & Co. Pvt Ltd. (supra). It is further observed that the Assess .....

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