TMI Blog2016 (11) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book, we direct Ld. A.O. to calculate the disallowance on the basis of 0.5% of expenditdure. Disallowance made under the head of 'foreign travelling expense' - Held that:- CIT(A) correctly held that out of total foreign travel expenses, assessee had explained an amount of ₹ 8,50,401/- and gave relief to this extent. In respect of balance amount of Rs,3,74,674/-, Ld. CIT(A) held, it to be having source of personal element and restricted the disallowance to 50% of such amount being Rs,1,87,337/-. Disallowance made u/s 40A(2)(b) - Held that:- A.O. and Ld. CIT(A) have admitted to the position that the salary paid to Smt. Pushpa Rathi is almost equal to the salary paid to the other staff members. Thus, L. A.O. has failed to establish the main ingredient to initiate Section 40A, which is, expenditure being excessive or unreasonable. We, therefore, are not agreeable to the ad-hoc disallowance sustained by Ld. CIT(A) when consistently in the preceding years, no such disallowance has been made by the Ld. A.O. We, accordingly delete the disallowance restricted by Ld. CIT(A) on this count. - I.T.A. No.5613, 5614, 5729/Del/2013, I.T.A.No. 6102/Del/2013 - - - Dated:- 19-9-2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed needs to be disallowed which is higher than ₹ 1 lac. In the A.Y.2005-06 the assessee has claim administrative and selling distribution expenses of ₹ 1.99 crore out of which selling and distribution expenses works out to ₹ 57,84,993/-. Hence the common administrative expense to be allocated for the purpose of section 14A disallowance works out to ₹ 1,41,49,223/-. Further the assessee has incurred an expenditure of ₹ 85,96,385/- towards interest. Hence the proportionate administrative and interest expense attributable to the exempt income works out to ₹ 2,58,838/- and ₹ 4,56,545/- respectively. Further assessee has shown investment of ₹ 2,16,62,957/- for year ending 31.03.2005 and ₹ 62,245/- for year ending 31.03.2004. Hence further disallowance of 0.5% of the average investment to the tone of ₹ 54,313/- also needs to be disallowed u/s 14A. Hence the total disallowance u/s 14A of ₹ 54,313/- needs to be disallowed Interalia the book profit u/s 115JB will also increased by an amount of ₹ 7,69,696/-. The assessee in response to question vide order sheet dated 31.07.2007 and as seen in the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true material for the year under consideration. 3.1 Ld. A.R. submitted that there has been no inquiry raised, which is apparent from the reassessment order passed by Ld. A.O. on 30.01.2013. He submitted that there was no tangible relevant material that was before the d. A.O. to form an opinion that income has escaped assessment. Ld. A.R. further demonstrated vide paper book pages 1-12, filed before us that the assessee had disclosed all material facts relating to the income and investment for the purposes of any disallowance u/s14A of the act. He submitted that Ld. A.O. in the original assessment order passed (placed at page 13 of the paper book), has admitted to the fact that the assessee has filed full details as per the order sheet. 3.2 Ld. A.R. submitted that the reopening being beyond 4 years and there being no failure on the part of the assessee to disclose full and true material, proviso (1) to Section 147 of the Act would be applicable to the facts of the present case. 4. On the contrary, Ld. D.R. relied upon the orders of authorities below. 5. We have perused the records placed before us and the arguments advanced by both the sides. Both the issues relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) of the Act and original assessment order was passed u/s 143(3) of the Acts on 11.12.2009. The issue relates to the disallowance u/s 14A of the Act for the year under consideration. The assessee had shown in the P L account, dividend being received to the tune of ₹ 30,43,724/-. It had claimed maintenance, selling and administrative expenses amounting to ₹ 2.59 crores out of which selling and distribution expenses worked out to ₹ 70,23,855/-. Assessee had further incurred an expenditure of ₹ 98,89,316/- towards interest. Ld. A.O. in reassessment proceedings, observed that since the assessee has earned exempt income from dividend and agriculture, and has not disallowed nay expenses towards earning of such income as per the provisions of Section 14A of the Act, he recomputed the income by applying rule 8D and added ₹ 3,84,434/- on account of proportionate administrative expenses and ₹ 1,00,345/- being 0.5% of average investment following Rule 8D. 6.4 Aggrieved by the order of Ld. A.O. assessee preferred appeal before Ld. CIT(A). Ld. CIT(A) upheld the additions made by the Ld. A.O., aggrieved by the order of Ld. CIT(A), the assessee is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e burden of proving the payment as genuine is on assessee. 3. On the facts in the circumstances of the case, the Ld. CIT(A) has erred in restricting the disallowance u/ s 14A read with rule 8D is not to be made on the percentage basis of administrative expenses. 7.1 The brief facts of the case are as under: 7.2 The assessee filed its return of income for the year under consideration on 27.09.2010 at nil income. The case of the assessee was selected for scrutiny and notice u/s 14(2) of the Act was issued. During assessment proceedings, Ld. A.O. observed that the assessee has incurred foreign travel expense to the tune of ₹ 15,21,802/- and the assessee has made excessive payment by way of salary to the wives of the directors. He also made disallowance u/s 14A of the Act on the exempt income earned by the assessee. The Ld. A.O. accordingly, made the following disallowances: a) Foreign Travel expenses Rs.8,50,401/- b) Excessive payment made u/s 14A(2) Rs.2,88,000/- c) Disallowance u/s 14A Rs.43,56,622/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Administration - Sh. Anupam Rathi B.Tech. Whole time Director Operations Purchase/sale - Sh. Anurag Rathi B.Com. Director Production - Smt. Pushpa Rathi Matriculate Administrator Looking after administration of company W/o Shro K. K. Rathi Smt. Parneeta Rathi B.Sc. Operations Assistant Operation Assistant W/o Sjhri Anupam Rathi Smt. Nandita Rathi B.Com. Production Assistant Production Assistant W/o Shri Anurag Rathi 7.7 Ld. A.R. further submitted that the Assessing Officer has not disputed the salary being paid to these personnel for the job profile undertaken by them. He submitted that the assessee could substantiate and obtain documentary evidences only to the extent of ₹ 8,50,401/-. He, therefore, prayed for the total di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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