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2017 (1) TMI 861

llowance should be restricted to 1% of the exempt income.First ground of appeal is decided in favour of the assessee,in part. - Disallowance of expenditure on account of repairs and maintenance - Held that:- During the course of hearing before us,the AR admitted that the assessee had not supplied the required information to the AO/FAA about the repairing.In our opinion,it is the duty of the assessees to produce evidence in their support if they claim that any expenditure was incurred for carrying out business. In the case under consideration,the assessee has failed to prove the genuineness of the expenditure incurred by it during the year under consideration. Therefore,we are of the opinion that order of the FAA does not suffer from any .....

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enditure + ₹ 22.38 lakhs under the head 0.5% of the investment). 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, the assessee made elaborate submissions.He referred to the order of the Tribunal, dated 30/04/2013 (ITA/3343/Mum/2012,AY.2008-09 and ITA/ 4155/Mum/2012,AY.2009-10)and held that material facts of the case under consideration were quite similar to the facts of AY.2009-10,that the assessee had claimed before the AO that it had not incurred any specific expenditure to earn exempt income,that he had not accepted the submission of the assessee,that there was no jsutification for disallowance out of interest expenditure because the deposit on which inter .....

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taxable income. Now with reference to the other expenditure claimed by the Assessee the entire expenditure debited to the Profit and Loss Account is as under:- 9. Thus as can be seen from the above, most of the expenditure is not at all attributable to earning tax free incomes, except of course some indirect expenses of office expenses and employees cost etc. 10. Subsection 2 of section 14A does not enable the Assessing Officer to invoke Rule 8D without determining, in the first instance the correctness of the claim of the Assessee, having regard to the accounts of the Assessee. Subsection 2 of section 14A mandates that it is only when having regard to the accounts of the Appellant, if AO is not satisfied with the correctness of the claim .....

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lip;…. 13. Before parting with the issue, we would like to comment about the mechanical way in which Assessing Officer and CIT(A) passed the orders. Assessee established a direct nexus, in the detailed submissions filed before AO and also the submissions made before the CIT(A) which fortunately are extracted by the Ld. CIT(A) in the orders. However, in the decision part in para 5.2.1, same para in both the orders, the CIT(A) notes that Assessee could not establish the nexus between borrowed funds and capital being invested in securities and that it was impossible to believe that out of common hodgepodge of funds, the entire capital would have come into investment in shares. This indicates that the facts are not co-related in the deci .....

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part. 7. Second ground of appeal is about disallowance of ₹ 7.78 lakhs. During the assessment proceedings,the AO found that assessee had claimed expenditure on account of repairs and maintenance of ₹ 7,78,400/-.He directed it to file the nature of the expenditure and to prove the genuineness of the transaction.The assessee produced self generated vouchers in its support.The AO observed that there was no details of construction in the vouchers,that nobody had signed the vouchers.He directed the assessee to furnish the current address and confirmation from the persons who had carried out the preparing job. As per the AO,the assessee did not file any explanation in that regard. Accordingly, he made an addition of ₹ 7.78 lakhs .....

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