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2016 (11) TMI 1297 - ITAT CHENNAI

2016 (11) TMI 1297 - ITAT CHENNAI - TMI - Disallowance u/s 14A - AO given a finding that the assessee had not used any borrowed funds for earning exempt income - Held that:- It is not disputed that the assessee for the relevant previous year had not claimed any income as exempt. In other words, even if the investment made by the assessee was capable to raise any exempt income in future, assessee had not earned any such income during the impugned assessment year. That Sec. 14A cannot be invoked w .....

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f special box - Held that:- No commercial concern would employ a software concern for development of software through its exposure from hoardings at a cricket tournament. They would be looking into the skills of the concern to decide whether it would be an appropriate choice for developing software. It is also an admitted position that the Managing Director of the assessee-company was the Vice President of Tamilnadu Cricket Association. The special box sponsored by the assessee could be used by .....

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ose of business. The assessee has not been able to show the nexus of the business of the assessee with the expenditure incurred for sponsoring of special box. Hence, we are of the view that the CIT(A) had rightly confirmed the disallowance made by the Assessing Officer - Decided against assessee - I.T.A.No.252/Mds/2016 - Dated:- 9-9-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Appellant : Shri A.V Sreekanth, JCIT For The Respondent : Shri S. S .....

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rule 8D. 4. Ld. AR submitted that the assessee had not earned any exempt income during the previous relevant to the impugned assessment year. Hence, according to him, invocation of sec. 14A was not called for. 5. Per contra, the ld. DR while admitting that assessee had not earned any exempt income, asserted that disallowance u/s 14A could not be linked to earning of exempt income as such. 6. We heard the rival contentions and perused the orders of the authorities below. The Assessing Officer had .....

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as exempt. In other words, even if the investment made by the assessee was capable to raise any exempt income in future, assessee had not earned any such income during the impugned assessment year. That Sec. 14A cannot be invoked where the assessee has not claimed any income of exempt is a view taken by various High Courts of the country. It has been held so by the Delhi High Court in the case of Cheminvest vs CIT 378 ITR 33, CIT vs Holcin India Pvt Ltd [2014] 90CCH 81, by P&H High Court in .....

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ure incurred for business promotion/advertisement. 8. Facts apropos are that the assessee engaged in the business of software development, had filed its return declaring income of ₹ 4,81,080/-. During the course of assessment proceedings, it was noted by the Assessing Officer that assessee had claimed business promotion expenditure of ₹ 14,95,000/-. The details of the expenditure provided by the assessee read as under: 1. Chennai St. Bede s Sports foundation ₹ 45,000 2. Youth A .....

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rship made for Tamilnadu Cricket Association. As per the assessee, it was felt that visibility of its own name would get enhanced since it would be displayed all over the venue. As per the assessee, the event was to be named after it. Further explanation of the assessee was that through such expenditure it had established an association with Tamilnadu Cricket Association and cricket being an important game in the country, software professionals employed by it being youngsters, the improved visib .....

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, during financial year 2007-08 for a sum of ₹ 60 lakhs. The sponsorship was for a period of six years. The special box could be used by not more than 15 persons during matches held in the stadium. As per the Assessing Officer, only advantage the assessee received was display of its name on the top of the box placed in the stadium. In addition, assessee had paid ₹ 4,00,000/- for sponsoring 14 cricket tournaments conducted by Tamilnadu Cricket Association. Conclusion of the Assessing .....

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rector of the assessee Shri K.V. Aiyappan was also the Vice President of the Tamilnadu Cricket Association and therefore, the expenditure was incurred for extraneous reasons. He made a disallowance of ₹ 14,95,000/-. 10. Before the CIT(A), argument of the assessee was that method of promoting assessee s business could not be directly compared to the revenue earned. As per the assessee, sponsorship paid for advertising was directly relatable to the business of the assessee due to the enhance .....

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he ld. AR, it was an admitted position that assessee had only limited clients. Hence, to increase its business, it was necessary to attract new clients. Advertisement through hoardings in the stadium where cricket tournaments were held and sponsorship of special box increased the visibility of assessee-company enhanced the chances for getting new clients. Further, as per the ld. AR, several other concerns like banks and insurance companies sponsored special boxes but Revenue could not show wheth .....

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14,95,000/- claimed by the assessee under the head business promotion, ₹ 14 lakhs was paid to Tamilnadu Cricket Association. Out of the balance sum of ₹ 95,000/-, a sum of ₹ 45,000/- was paid to Chennai St. Bede s sports foundation and ₹ 50,000/- was paid to Youth Association for classical music. Nothing whatsoever has been brought out by the assessee to show the business purpose of these payments. Coming to the payments made to Tamilnadu Cricket Association, out of the .....

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