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2017 (2) TMI 444 - ITAT MUMBAI

2017 (2) TMI 444 - ITAT MUMBAI - TMI - Disallowance made u/s.14A - Held that:- We find that the assessee had an exempt income to the tune of ₹ 7.97 lakhs,that the AO made disallowance of ₹ 2.84 lakhs, invoking the provisions of section 14 A r.w.r. 8D of the Rules, that the FAA enhanced disallowance to ₹ 21.80 lakhs,that both the authorities held that there was no proof that the assessee had sufficient own funds to make investments in shares during the year under consideration. .....

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ncome.In our opinion if the assessee does not claim any expenditure for earning exempt income no dis - allowance can be made invoking the provisions of section 14A r.w.r.8D of the Rules. - Decided in favour of assessee - Addition under the head sundry balances written off - Held that:- There is no bar on making a claim about the sums written off in a slump sale transaction. The assessee had taken over the assets as well as the liabilities of VI. In the remand report proceedings,the assessee .....

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s had disputed levy of services and finally did not pay such tax. The loss claimed by the assessee was directly linked with business activity and, therefore,was a business loss. The writing off of the amount is not in dispute. So, even if it could not be allowed u/s.36 the same is allowable u/s.28 of the Act. Therefore, we allow Ground No.2. - Addition under the head insurance claim written off - Held that:- We find that the claim had arisen after the slump sale took place,that the erstwhile .....

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unt. Therefore, reversing the order of the FAA, we decide Ground No.3 in favour of the assessee. - FAA was not justified in enhancing the book profit u/s. 115JB of the Act with regard to 14A disallowance. - Addition on account of bogus expenditure - Held that:- If we go through the above statement of BG and the letter of the assessee dt.3.12.2012, it becomes clear that the BG had made the disclosure of ₹ 5 crores in the capacity of MD of the company and that the assessee had promis .....

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The Assessee : Shri Mitesh Shah -AR PER Rajendra A.M.- Challenging the order,dated 07/10/2014,of the CIT(A)-39,Mumbai the Assessing Officer (AO)and the assessee have filed cross appeals for the AY.2011-12.The assessee has also filed appeal for the AY.2010-11.As most of the issues in these appeals are common,so,we are adjudicating them by passing a single order. ITA/69/Mum/2015,AY. 2010-11: Brief background- 2. An action u/s. 132 of the Act was carried out on 13/10/2010 at the business/residenti .....

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u/s.14A of the Act.During the assessment proceedings,the AO found that the assessee was in receipt of exempt income by way of dividend of ₹ 7.97 lakhs,that it had made investment in shares to the tune of ₹ 2.99 crores,that no disallowance u/s.14A was made.He directed the assessee to file submission in that regard.The assessee submitted that it had made investment out of its own funds and accruals.However,the AO did not agree with the assessee and referring to the judgment of Godrej .....

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340)and made submissions. After considering the available material,the FAA held that the assessee had received tax-free dividend income of ₹ 7.97lakhs,that it had claimed that no expenditure was incurred for earning the exempt income,that it had made investment of ₹ 2.99 crores in shares and had submitted that investment was made for strategic purposes that it had not established satisfactorily that entire investment had been made out of internal accruals alone,that no details were .....

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ufficient own funds to make investment.Alternatively,it was argued that reasonable disallowance should be made keeping in consideration the exempt income earned by the assessee.The Departmental Representative (DR)supported the order of the FAA. 2.4. We have heard the rival submissions and perused the material available on record. We find that the assessee had an exempt income to the tune of ₹ 7.97 lakhs,that the AO made disallowance of ₹ 2.84 lakhs, invoking the provisions of section .....

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has been brought on record to prove that the shares purchased by the assessee for the year under appeal was not a strategic investment.We find that the AO/FAA has not mentioned anything about the expenditure incurred by the assessee for earning exempt income.In our opinion if the assessee does not claim any expenditure for earning exempt income no dis - allowance can be made invoking the provisions of section 14A r.w.r.8D of the Rules. Considering the above,first Ground of appeal is decided in f .....

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sion of the assessee,the AO held that the assessee had neither submitted the details required not furnished any proof to show that the amount in question had been offered for tax in the earlier years.Invoking the provisions of section 36(1) (vii)of the Act,he made a disallowance of ₹ 84.65 lakhs. 3.1. During the appellate proceedings before the FAA, the assessee stated that it had written off grant receivable from ASIDE (Rs. 71.78 lakhs) and Service Tax (Rs. 12.87 Lakhs),that it had acquir .....

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ted by the client of the assessee and was not paid by it, the assessee wrote it off.The assessee submitted copies of letters of Maharashtra Maritime Board wherein it was mentioned that and amount of ₹ 253.09 lakhs was released to the erstwhile company towards Central assistance scheme.The additional evidences produced by the assessee,were admitted under rule 46A of the Rules by the FAA and were forwarded to the AO. After considering the remand report of the AO and the rejoinder and the sub .....

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sions of section 36(2) related the condition to be fulfilled by the assessee itself and not by any other person,that the assessee had taken over the assets and liabilities at fair market value in contrast to written down value in the books of accounts of the seller company, that the conditions of section 36 were not satisfied.Finally,he upheld the disallowance made by the AO. With regard to the alternate argument,he observed that it would tantamount to writing off and asset taken over under slum .....

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, that assessee was not entitled to claim the written off balances for the claim for the year under consideration . 3.3. We have heard the rival submissions and perused the material available on record.We find that the assessee had acquired M/s.Vikram Ispat (VI)from M/s. Grasim Industries during the year under consideration as a going concern,that VI was granted Central assistance by Maharashtra Maritime Board,that out of the total grant of ₹ 380 lakhs the board released assistance of S .....

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bar on making a claim about the sums written off in a slump sale transaction.The assessee had taken over the assets as well as the liabilities of VI. In the remand report proceedings,the assessee had submitted the evidences proving that the erstwhile entity had offered the income under the head other income. It is found that grant receivable from ASIB of ₹ 71.78 lakhs was credited in the P&L A/c. for the period ended 22.5.2009.Thus, the amount written off during the year under consider .....

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le u/s.28 of the Act.Therefore, we allow Ground No.2. 4. Next ground of appeal deals with confirming the addition of ₹ 9.37 crores under the head insurance claim written off.During the assessment proceedings,the AO found that the AO found that the assessee had debited its profit and loss account by insurance claim written off of ₹ 9.37 crores.He directed it to file necessary details in that regard.After considering the same,he held that the write-offs were not related to any income o .....

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shown STCG at ₹ 2.09 crores and ₹ 3.61 crores in the AY.s 2008-09 and 2009-10 in accordance with the provisions of section 50,that the insurance company repudiated the claim on 25/05/2012,that all the conditions of section 36 were satisfied, that the debt arose in the ordinary course of business carried on by the assessee and had been taken into account in computing assessable income in the past.The FAA ordered for remand report from the AO in that regard. After considering submissio .....

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e filing return of income for AY 2008-09 and 2009- 10 it had shown STCG of ₹ 2.09 crores and ₹ 3.61crores in accordance with the provisions of section 50 with regard to claim of insurance made by it, the insurer i.e. The New India Assurance Co.Ltd. repudiated the claim made by the assessee. The DR relied upon the order of the FAA. 4.3. We have heard the rival submissions. We find that the claim had arisen after the slump sale took place,that the erstwhile company had claimed loss wit .....

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order of the FAA, we decide Ground No.3 in favour of the assessee. 5. Remaining two grounds,deal with levy of interest/penalty.Ground 4 is consequential and ground five is premature.So fourth ground is allowed for statistical purposes and fight ground is dismissed. ITA/70/Mum/2015-AY.2011-12: 6. First effective ground of appeal,raised by the assessee,is about confirming the addition of ₹ 13.18 lakhs made by the AO u/s.14 A r.w.r. 8D of the Rules. 6.1. While deciding the identical ground f .....

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elated with disallowance made u/s.14A,so,following our order for Ground No.1 we hold that FAA was not justified in enhancing the book profit u/s. 15JB of the Act with regard to 14A disallowance.Second ground stands allowed. 8. Next two grounds,deal with levy of interest and penalties u/s.271.Both the issues are consequential/premature.So,third ground is allowed for statistical purposes and last ground is dismiseed. ITA/394/Mum/2015-AY.2011-12: 9. The solitary ground of appeal,raised by the AO, i .....

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ed 18.10.2012,the AO asked the assessee to explain as to whether the income admitted by it during the search proceedings had been offered to tax. It was also directed to produce the supporting documents in that regard.He further asked the assessee to explain as to why the depreciation claimed, if any, should not be disallowed in case the expenditure was capitalised.The assessee was also directed to specify the end use of the funds raised by Maginot Trading Co.Pvt.Ltd.In its response, dt.3.12.201 .....

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assessment years.So,he treated the expenditure of ₹ 5 crores as unexplained expenditure and added it to the total income of the assessee. 9.2. During the appellate proceedings before the FAA,the assessee made elaborate submissions in that regard.A remand report was called from the AO.After considering available material,the FAA held that BG had admitted the accommodation entries and offered it for taxation,that during appellate proceedings it was claimed that the statement of BG were reco .....

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of BG recorded on the date of search and contended that statement recorded u/s.132(4) was not retracted,that the FAA had not understood the statement in the right perspective, that the surrender was made in the hands of two corporate entities and not in the individual hands of the BG, that by surrendering the impugned amount the assessee had prevented the department from making further investigation in that regard. He referred to page-7 of the PB wherein details of land development account were .....

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ress in the memo, however, no such party was found to be existing at either of the addresses given in the memo. Please furnish the address of this party and explain the transactions with them. Ans: The payments made to M/s. Maginot Trading Co.Pvt. Ltd., amounting to total of ₹ 5.Crores, in the current financial year, made on account of supply of muram at the Raigad site of M/s. Welspun Maxsteel Ltd., is nothing but an accommodation entry arranged by one of the broker for generation of cash .....

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