TMI Blog2017 (3) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of ₹ 10,000/- and less between the income as reported in books of accounts and income as reported in form no 26AS keeping in view smallness of difference and difficulties faced in reconciling the same. Disallowance of expenditure towards interest incurred in relation to earning of exempt income u/s 14A - Held that:- The figure of investments in shares which are capable of yielding exempt income was undisputedly adopted by the AO as ₹ 3,35,337 as at beginning of year and ₹ 3,53,838/- as at year end while computing disallowance u/r 8D(2)(ii) of 1962 Rules r.w.s. 14A of 1961 Act. There is no averment/finding on record brought by authorities below that interest bearing funds were specifically invested in assets being shares capable of yielding exempt income and in the absence thereof , the presumption shall apply that the assessee has used its own interest free capital which undisputedly was of ₹ 32,68,881/- and the same was utilized for making investments of ₹ 3,53,838/- in shares which were capable of yielding exempt income. - Decided in favour of assessee. - I .T.A. No.3349/Mum/2016 - - - Dated:- 17-3-2017 - SHRI C.N. PRASAD, JUDICIAL MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS PER AIR AMOUNT (Rs) AS PER BOOKS OF ACCOUNT SALES(Rs) DIFFERENCE (Rs) VORA INDUSTRIES 4,846,072 4,846,071 1 M.P.SHAH BRIGHT BAR P. LTD. 32,248 32,241 7 JYOTI STEEL 1,804,937 1,804,802 135 INDUSTRIES SUNRAJ PLASTICS 598,927 597,928 999 A TO Z STEELLOYS PVT LTD 674,832 673,686 1,146 GAJANAN ISPAT P. LTD 19,340 16,973 2,367 J. J. IND.(PROP. ASHOKBHAI B DOSHI) 58,420 51,620 6,800 VIPRAS CASTING LTD GORADIA 1,342,014 1,334,243 7,771 PARAGON TRADING COMPANY 270,367 260,178 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B= Average value of investment which does not form part of total income (335337 +353838)/2 = 344588 C= Average value of total assets as appearing in balance sheet of the assessee as on 1st day and last day of previous year = (45447434+52054970)/2 = 48751202 Disallowance = AXB/C III 0.5% of average value of investment which does not form part of total income as referred in B above (0.5% of 344588 1723 TOTAL DISALLOWANCE 24410 Thus, A.O. worked out disallowance of expenditure to the tune of ₹ 24,410/- incurred in relation to earning of income which does not form part of total income as mandated u/s 14A of 1961 Act read with Rule 8D(2)(ii) and 8D(2)(iii) of Income-tax Rules, 1962, vide assessment order dated 20-03- 2013 passed by the AO u/s 143(3) of 1961 Act. 5. Aggrieved by the additions made to income by the A.O. vide assessment order dated 20-03-2013 passed by the AO u/s 143(3) of 1961 Act, the assessee carried the matter further by filing first appeal before ld. CIT(A). 6. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 504 ITAT Mumbai) , which contentions was rejected by the ld. CIT(A) who confirmed the additions made by the A.O. to the tune of ₹ 24,410/- towards disallowance of expenditure incurred in relation to earning of income which does not form part of total income as contemplated u/s 14A of 1961 Act read with Rule 8D(2)(ii) and 8D(2)(iii) of 1962 Rules , by holding that the assessee must have incurred some expenses to earn exempt income, vide appellate order dated 29-01-2016 passed by learned CIT(A). 7. Aggrieved by the appellate order dated 29-01-2016 passed by ld. CIT(A), the assessee filed second appeal before the tribunal. 8. With respect to the first issue, the ld. Counsel for the assessee submitted that the reconciliation statement reconciling the difference between income as reported in AIR information with income as reported in books of accounts , was duly submitted before the Revenue. The difference of ₹ 2,28,424/- could not be reconciled because of magnitude of transactions. The assessee contended that since it is small difference , additions made should be deleted. The ld. Counsel also relied on decision of the tribunal in the case of M/s A.F. Ferguson C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by ₹ 2,28,424/- as reflected in assessee s books of accounts which led to under-reporting of income offered to tax as was contended by authorities below leading to additions being made in the hands of the assessee. We find that the assessee has produced the copies of ledger account as well AIR data base information as reflected in 26AS , wherein there is difference between the income reported between books of accounts and 26AS, to the tune of ₹ 2,28,424/- leading to under-reporting in the income offered for taxation. The decision of A F Ferguson and Co. (supra) relied upon by the assessee is distinguishable as the income reported in that case in books of accounts which was offered for taxation was higher than income as reported in AIR information data base, wherein there was no under-reporting to income offered for taxation by the said tax-payer. Further, in the said case, the taxpayer had contended that full and complete details of parties as were appearing in AIR information data base is not available, while in the instant appeal before us, the income reported in books of accounts which was offered for taxation to Revenue was lower than income as is appearing in 26A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference of ₹ 10,000/- and less between the income as reported in books of accounts and income as reported in form no 26AS keeping in view smallness of difference and difficulties faced in reconciling the same. Thus, this issue needs to be set aside and restored back to the file of the A.O. for de-novo determination of the issue on merits. The assessee is directed to produce all details and cogent evidences relevant to the matter before the A.O. in its defense. The AO shall grant opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly. 11. With respect to the second issue, the ld. Counsel submitted that the grounds raised by the assesse is restricted to disallowance of expenditure towards interest of ₹ 22,687/- incurred in relation to earning of exempt income as was disallowed by the AO u/s 14A of 1961 Act read with Rule 8D(2)(ii) of 1962 Rules , which disallowance was confirmed by ld. CIT(A). It was submitted that the investment in shares was made by the assessee out of its own funds which were interest-free funds available to the assessee. The ld. Counsel invited our attention to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend income of ₹ 15,001/- claimed as an exempt from tax by invoking Section 14A of 1961 Act r.w.r. 8D(2)(ii) of 1962 Rules. The figure of investments in shares which are capable of yielding exempt income was undisputedly adopted by the AO as ₹ 3,35,337 as at beginning of year and ₹ 3,53,838/- as at year end while computing disallowance u/r 8D(2)(ii) of 1962 Rules r.w.s. 14A of 1961 Act. There is no averment/finding on record brought by authorities below that interest bearing funds were specifically invested in assets being shares capable of yielding exempt income and in the absence thereof , the presumption shall apply that the assessee has used its own interest free capital which undisputedly was of ₹ 32,68,881/- and the same was utilized for making investments of ₹ 3,53,838/- in shares which were capable of yielding exempt income. The assessee had rightly relied on the judgment of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) and in the case of CIT v. HDFC Bank Ltd. (IT Appeal No. 330 of 2012 vide orders dated 23rd July, 2014 ( reported in (2014) 366 ITR 505(Bom.)) . In our considered view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
