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2016 (11) TMI 957 - ITAT LUCKNOW

2016 (11) TMI 957 - ITAT LUCKNOW - [2016] 51 ITR (Trib) 594 - Addition u/s 14A - Held that:- In the present case, we note that the assessee had earned dividend income to the extent of ₹ 2,22,343 and has claimed it as exempt income and informed the Assessing Officer that it has not incurred any expenditure in earning the income which is claimed as exempt income and the hon'ble Delhi High Court in the case of CIT v. Taikisha Engineering India Ltd. [ 2014 (12) TMI 482 - DELHI HIGH COURT ] whe .....

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n the instant case has relied on the order of the Kolkata Bench however, has not given any citation or I. T. A. Number and so it is not clear as to what were the facts or the reason given in that case and on what basis whether any observation has been made cannot be discerned and so the reliance by the Assessing Officer of the said decision of the Kolkata Bench of the Tribunal not to record any satisfaction has no legs to stand and so it falls down and since the pre-requisite condition for invok .....

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before filing of return of income which was filed on September 29, 2012 and since the learned Departmental representative could not controvert this fact recorded by the learned Commissioner of Income-tax (Appeals) that PF/ESIC dues were in fact paid before the assessee filed the return of income, so we are of the considered opinion that the expenditure need to be allowed in the hands of the assessee as held by the hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [2009 (11) TMI 2 .....

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s. 1 to 3 relates to the deletion of addition of ₹ 1,93,47,040 under section 14A of the Income-tax Act, 1961 (hereinafter "the Act") which was made by the Assessing Officer. 3. Brief facts of the case is that the assessee is a limited company engaged in the business of manufacturing textiles fabrics, etc. The Assessing Officer noted that the assessee has shown dividend income to the extent of ₹ 2,22,343 and claimed it as exempt income in its computation of total income. The .....

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that it has sufficient balance in reserve and surplus account and the investment has been made from its own resources. However, the Assessing Officer was not convinced by the said explanation of the assessee and relying on the co-ordinate Bench decision of the Tribunal in I. T. A. No. 9/Lkw /2008 in the case of Asst. CIT v. Ratan Housing Development Ltd. wherein it was observed that for disallowance under section 14A it is immaterial that any dividend is in fact earned or not. So while making d .....

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Act is being calculated as follows : A = Average amount of expenditure by way of interest ₹ 1,41,66,02,934 Investment A.Y. 2012-13 A.Y.2011-12 30,07,67,119 39,23,96,259 B = Average value of investment (30,07,67,119 + 39,23,96,259)/2 = ₹ 34,65,81,690 C = Average of total assets (32,64,30,93,862 + 23,10,40,33,403)/2 = ₹ 27,87,35,63,633 8D(2)(ii) = A x B/C = 1,41,66,02,934 x 34,65,81,690 / 27,87,35,63,633 = 1,76,14,132 8D(2)(iii) = ½ % (B) [½ % of 34,65,81,690] =  .....

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8D(1) has not been met by the Assessing Officer thereby, the application of formula as laid down in rule 8D(2) is unjustified and the addition made by the Assessing Officer deserves to be deleted. The assessee's case is also covered by the decision of the hon'ble Allahabad High Court reached in the case of Addl. CIT v. Dhampur Sugar Mills P. Ltd. [2015] 370 ITR 194 (All) (I. T. A. No. 220 of 2014 dated November 5, 2014) wherein the sources of investment was fresh share capital, and accor .....

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peals), the Revenue is before us. 6. We have heard both the parties and perused the record. We take note that from a bare reading of section 14A, we note that unless the Assessing Officer records a clear finding that the expenditure shown or even not shown in the assessee's account has been incurred, he cannot proceed to compute the disallowance as prescribed by the rule 8D. The condition precedent for the Assessing Officer to embark upon the formula stipulated in rule 8D in order to compute .....

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of section 14A of the Act, even if the assessee's claim is that no expenditure has been incurred by him relating to income which does not form part of total income, then as per sub-section (3) of section 14A recourse can be taken by the Assessing Officer of sub-section (2) of section 14A and in this case when the assessee assert that no expenditure had been incurred in relation to the earning of exempt income then the Assessing Officer has to record his dissatisfaction in respect to the cor .....

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ved that it is immaterial whether any dividend in fact is earned or not, whether the said observation of the co-ordinate Bench is correct proposition of law in the light of the decision of the hon'ble jurisdictional High Court (Allahabad) wherein the hon'ble High Court held in the case of Income-tax Appeal No. 88 of 2014, CIT v. Shivam Motors P. Ltd., decided on May 5, 2014. In the said decision it has been held : "As regards the second question, section 14A of the Act provides that .....

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ee had not earned any tax-free income. Hence in the absence of any tax-free income, the corresponding expenditure could not be worked out for disallowance. The view of the Commissioner of Income-tax (Appeals) and the Tribunal does not give rise to any substantial question of law. Hence, the deletion of the disallowance of ₹ 2,03,752 made by the Assessing Officer was in order." In the light of the aforesaid decision of the hon'ble jurisdictional High Court reliance placed by the Re .....

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the order without which we are unable to take any reliance on the same. However, we have to disagree with the proportion or law as noted by the Assessing Officer and wherein it is stated that when the taxpayer does not offer any disallowance on his own, the provision of section 14A(2) read with rule 8D can be invoked without there being any need of any express satisfaction about incorrectness of such claim. We must say that the bare reading of section 14A does not support such an interpretation .....

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to the income which does not form part of the total income under the Act. 10. In the present case, we note that the assessee had earned dividend income to the extent of ₹ 2,22,343 and has claimed it as exempt income and informed the Assessing Officer that it has not incurred any expenditure in earning the income which is claimed as exempt income and the hon'ble Delhi High Court in the case of CIT v. Taikisha Engineering India Ltd. dated November 25, 2014, [2015] 370 ITR 338 (Delhi) ; [ .....

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We find that the Assessing Officer in the instant case has relied on the order of the Kolkata Bench however, has not given any citation or I. T. A. Number and so it is not clear as to what were the facts or the reason given in that case and on what basis whether any observation has been made cannot be discerned and so the reliance by the Assessing Officer of the said decision of the Kolkata Bench of the Tribunal not to record any satisfaction has no legs to stand and so it falls down and since .....

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n 36(1)(va) of the Act regarding late deposit of the employee's contribution to the PF and ESI. 13. Brief fact of the case is that the Assessing Officer noted that the amounts which he has received from the employee's for deposit for the PF/ESIC account has not been deposited in the respective account on or before the due date as per the provision of section 36(1)(va) of the Act, therefore, he disallowed a sum of ₹ 41,94,658. Aggrieved the assessee preferred an appeal before the le .....

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ue dates as income under section 36(1)(va). The authorised representative of the assessee has submitted the details along with copy of challans for payments of such dues before filing the return of income. Once dues are paid before filing of return of income, such expenditure are to be allowed in the hands of the assessee. Thereby, the resultant effect will be nil to the returned income of the assessee. The authorised representative of the assessee has relied upon the case law (supra) wherein th .....

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