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2016 (11) TMI 1029 - ITAT MUMBAI

2016 (11) TMI 1029 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- The assessee’s case is covered by sub-sections (2) & (3) of section 14A as the assessee is claiming that no expenditure has been incurred by it in relation to the exempt income. We have seen that as per the balance sheet , investment reflected in as on 31.03.2010 was of ₹ 29,98,21,124/-. Further, as per the balance sheet for AY 2009-10, the total investment of the assessee as on 31.03.2010 was ₹ 29,98,21,124/ .....

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(A). The power of ld CIT(A) is co-terminus with AO. The disallowance made by AO and sustained by ld CIT(A) is not in accordance with the procedure prescribed u/s 14A r.w.s. Rule 8D. There is no finding that assessee has sufficient fund available with him or not. Hence, we deem it appropriate to restore this ground of appeal to the file of AO to pass order afresh. - Disallowance of Software Usages Charges - revenue v/s capital expenditure - Held that:- For ascertaining as to whether the expe .....

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nate bench of Tribunal held that expenses incurred on up-gradation of software do not result into acquisition of any asset nor acquisition of enduring benefits as software become obsolete very quickly. - I.T.A. No. 1778/Mum/2013, I.T.A. No. 5150/Mum/2014 - Dated:- 30-9-2016 - SHRI B. R. BASKARAN, AM AND SHRI PAWAN SINGH, JM For The Appellant : Shri Feroze Andhyarujina -AR For The Respondent : Shri Nitin Waghmode (DR) ORDER Per Pawan Singh, JM: 1. These two appeals are filed by assessee against t .....

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the case are that the assessee filed return of income for relevant Assessment Year (AY) on 22.09.2009 declaring total income of Rs. NIL. The return of income came under scrutiny. The assessment under u/s 143( 3) was framed vide order dated 13.02.2011. While framing the assessment, the AO made the disallowance u/s. 14A of ₹ 19,43,486/-. The assessee claimed Software uses Charges of ₹ 14,56,292/-. The AO hold that the payments were made on account of software development which is capit .....

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isallowed a sum of ₹ 10,52,335/- u/s. 14A. The assessee claimed Software Uses charges of ₹ 13,83,762/-. The AO allowed depreciation @ 60% and ₹ 5,53,505/- was disallowed in the assessment order. The assessee carried that matter in appeal before the First Appellate Authority (FAA), wherein both the disallowance was confirmed. Hence, the present appeal is filed before us. 3. We have heard Ld AR of the assessee and Ld DR for the Revenue and perused the material available on record .....

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ding that any expenses were incurred in relation to earning of exempt income. The Ld. AR of the assessee further relied upon the decision of Rajshree Production Pvt. Ltd. (TS-570 ITAT 2013, Mum), Kalyan Steel Ltd. vs. ACIT (ITA No. 1733/PN/2011), CIT vs. Gujarat State Fertilizers & Chemicals Ltd. (2013) 85 CCH 226 (GUJHC), Shopper Stop Ltd. vs. ACIT, ACIT vs. Midcaps Ltd. decision of Indore Tribunal. On the other hand, Ld. DR for the Revenue strongly supported the order of authorities below. .....

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le 8D of Income-tax Rules, 1962 and calculated the disallowance of ₹ 19,43,486/-. Before the First Appellate Authority (FAA), the assessee submitted that the entire investment have been made out of assessee s own fund as far as interest of ₹ 3,92,930/- which was paid to Karnataka Bank Ltd. on term loan of ₹ 500 Lakhs, taken from it on 30th May 2008, on the same date it was utilized by advancing loan to M/s harmony Investments & Properties of interest which is shown as incom .....

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tire capital would have given into investment in share without a part going to the business. It was further concluded that it is not possible that entire income would have been invested in share and debentures and share application money specially when the assessee not categorized as to how such sum had been invested in business. The assessee s case is covered by sub-sections (2) & (3) of section 14A of the Act as the assessee is claiming that no expenditure has been incurred by it in relati .....

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owance the AO not made any enquiry about the nature of investment as if it was strategic or the investment were made in earlier years and the manner in which exempt income was derived and credited to the account of assessee. Similarly no such exercise was made by Ld. CIT(A). The power of ld CIT(A) is co-terminus with AO. The disallowance made by AO and sustained by ld CIT(A) is not in accordance with the procedure prescribed u/s 14A r.w.s. Rule 8D. There is no finding that assessee has sufficien .....

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d of appeal raised in the present appeal is that the CIT(A) erred in confirming the disallowance of Software Usages Charges. The Ld. AR of the assessee argued that Software Uses Charges are Revenue in nature. The Software Uses Charges are not enduring in nature and they are fully allowable and relied upon the decision of Thomas Cook (I) Ltd. vs. DCIT, ITAT, Mumbai in ITA No. 9353 & 9354/Mum/1992 reported in 15 SOT 392. The Ld. DR for Revenue supported the orders of authorities below. 6. We h .....

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