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Zest Aromas Private Ltd. Versus ACIT, Circle-4, Baroda

2017 (2) TMI 738 - ITAT AHMEDABAD

Disallowance u/s 14A - Held that:- We observe that assessee had earned exempt dividend income of ₹ 65.33 lacs and also paid interest of ₹ 15.52 lacs on borrowed funds and assessee’s investment as on 31.03.2007 stood at ₹ 9.52 crores as against ₹ 10.38 crores as on 31.3.2006. Further amended Rule 8-D with respect to disallowance u/s 14A of the Act came in effect from Asst. Year 2008-09 whereas in this appeal we are dealing with Asst. Year 2007-08. - We find force in th .....

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ncluded share capital and reserves stood at ₹ 38.42 crores as on 31.3.2007 which means that assessee’s interest free funds is almost 4 times the investment made. - CIT vs. Torrent Power Ltd. (2014 (6) TMI 185 - GUJARAT HIGH COURT) has held that if the assessee has sufficient interest free funds to cover up the investment then no disallowance of interest expenses is called for.As in the present case out of the total disallowance of ₹ 5,76,925/- PMS charges of ₹ 4,79,611/- h .....

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P. Hemani, AR For The Respondent : Shri James Kurien, Sr. DR. ORDER PER Manish Borad, Accountant Member. This appeal of the assessee for Asst. Year 2007-08 is directed against the order of ld. CIT(A)-III, Baroda, dated 30.05.2013 vide appeal No.CAB/III/-119/09-10 arising out of order u/s 143(3) of the IT Act, 1961 (in short the Act) dated 29.12.2009 framed by Addl. CIT, Range-4, Baroda. Assessee has raised following grounds of appeal :- 1.00 On the facts and circumstances of your appellant' .....

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ement Charges in the computation of total income. 1.02 Your appellant prays before your honour to hold so now and delete the impugned disallowance. 2.00 Your appellant craves leave to add, alter and / or amend the ground herein above raised. 2. We find that this appeal is time barred by 8 days and on asking for the reasons for the delay following reasons were provided by the assessee :- (i) The impugned order passed by Ld. CIT(A) was received by the assessee on 12.06.13. The said order was hande .....

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order was immediately forwarded to the concerned Chartered Accountant. Thereafter, the said Chartered Accountant prepared Form No.36 along with Grounds of Appeals and forwarded the same to the assessee for signature. Thereafter, the present appeal came to be filed before Your Honors on 19.08.13. In the mean-time, there was a delay of 8 days in filing the appeal. 3. We find that this appeal is barred by mere 8 days due to lapse in performing duty assigned and carelessness of the Accountant, who f .....

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wing total income at ₹ 1,93,98,830/- and value of fringe benefits at ₹ 2,75,925/-. Case was selected for scrutiny assessment. Notices u/s 143(2) of the Act followed by notice u/s 142(1) of the Act were issued. Necessary details including audited financial statement were provided. During the course of assessment proceedings ld. Assessing Officer while examining the provisions of section 14A of the Act observed that assessee received exempt dividend income of ₹ 65.33 lacs and inv .....

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r.8-D disallowed a sum of ₹ 5,76,925/-. Also addition of ₹ 7,94,612/- was made towards differential value of the borrowed funds and loans given. Accordingly, after making addition of ₹ 13,71,537/- income was assessed at ₹ 2,07,70,367/-. 5. Assessee went in appeal before ld. CIT(A) against the impugned assessment order and got part relief as the impugned disallowance of ₹ 7,94,612/- on account of difference of borrowed funds was deleted whereas disallowance u/s 14A o .....

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f employees. Attribution of part of employee costs towards investment activities is therefore justified. Once incurring of expenditure towards managerial and administrative purposes for earning of investment income cannot be ruled out, it is a case falling under sub-section (2) of section 14A, i.e. appellant's claim that no expenditure was incurred for earning tax free income is incorrect. But at the same time it is also correct that the expenditure attributable to earning of tax free income .....

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used for earning taxable as well as tax free incomes, then a part of interest paid has to be attributed to tax free income. Hon'ble Kerala High Court in its decision in the case of [2011] 10 taxmann.com 213 (Ker.), Comm/ss/oner of Income-tax*, Thrissur v. Dhanalakshmy Bank Ltd, has held that once no separate accounts are maintained for taxable and non taxable heads of incomes, then disallowance as per rule 8D will have to be made. The onus is on the assessee to establish that the investments .....

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8377; 1.46 crores only as against the investment in securities tor ₹ 9.52 crore as on 31.03.200/- From the details submitted it Is seen that the appellant is also having profits from investments and dividend from investments which are being re-invested in tax free securities. The appellant is also having separate cash credit account for manufacturing purposes. Hence, the disallowance of interest paid in proportion to ratio of investment in tax free securities to total assets is not reasona .....

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grieved, assessee is now in appeal before the Tribunal against the impugned disallowance u/s 14A of the Act of ₹ 5,76,925/-. 6. Ld. Authorised Representative (AR) submitted that Rule 8D r.w.s. 14A of the Act is applicable from Asst. Year 2008-09 whereas, appellant's case is for Asst. Year 2007-08. Further at this stage, it may be appreciated that Ld. CIT(A), while confirming the disallowance u/s 14A of the Act has observed that appellant has paid total Portfolio Management Services(PMS .....

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.14A w.r.t. PMS charges of ₹ 4,79,611/- doesn't hold any water since corresponding income has already been offered to tax. As regards balance disallowance of ₹ 97,314/- (i.e. ₹ 5,76,925 -Rs.4.79,611), assessee's investments in shares at the year-end are to the tune of Rs.9,52,89,090/- (Pgs.33-58 @ 33 of P/B) whereas shareholders' funds available with assessee were ₹ 38,41,80,686/- (i.e. Share Capital ₹ 36.00,000 + Reserves ₹ 38,05,80,686) (Pgs.33-5 .....

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iance Utilities & Power Ltd. - 313 ITR 340 (Bom) > Munjal Sales Corporation vs. CIT - 298 ITR 298 (SC) Accordingly, impugned disallowance deserves to be deleted in toto. 7. On the other ld. Departmental Representative (DR) vehemently argued supporting the orders of lower authorities. 8. We have heard the rival contentions and perused the material placed before us and gone through the decisions relied on by the ld. AR. Solitary grievance of the assessee is against the action of ld. CIT(A) .....

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s appeal we are dealing with Asst. Year 2007-08. 9. We further observe that ld. AR referred to the computation of income wherein portfolio management charges(PMS) of 4,79,611/- was paid to look after the affairs of investments in order to give best returns and this amount has been added back to the profit and loss account under the head profits and gains of the business as is appearing in page 2 of the paper book. Further assessee has reduced PMS charges of ₹ 4,79,611/- against taxable inc .....

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