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Ganeshay Overseas Industries Ltd Versus The D.C.I.T., Central Circle-1, Chandigarh and vice-versa

2015 (10) TMI 2646 - ITAT CHANDIGARH

Addition u/s 14A - Held that:- From the perusal of Profit & Loss Account, it appears that no interest to bank or otherwise was paid in the earlier year, which goes to prove that the investments having been made in earlier year were made out of owned funds of the assessee and no borrowed funds were used for such investments. As regards interest of ₹ 66,91,327/- being paid this year, it is seen from the perusal of Annexure-3 of the balance sheet that ICICI working capital limit amounting to .....

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elated to earning tax-free income, as from the explanation and evidences brought on record by the assessee, as stated hereinabove, it is proved beyond doubt that the interest expenditure incurred by the assessee during the year does not have any nexus to earning of tax-free income. - As regards the administrative expenses part of the disallowance under section 14A the assessee has all along been contending before the lower authorities that there was no need for it to incur any such expendit .....

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recording of satisfaction of the Assessing Officer is a must, as held in the case of CIT Vs. Deepak Mittal. (2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT ). Therefore, in the circumstances, no disallowance on account of expenses under section 14A of the Act can be made. - Decided in favour of assessee. - ITA No.186/Chd/2015 , ITA No.236/Chd/2015 - Dated:- 19-10-2015 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER Appellant by: S/Shri Sudhir Sehgal & Ashok Goyal Respon .....

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/- in the previous year. However, it has not shown any income on this except a dividend income of ₹ 23,16,000/-, which has been claimed as exempt under section 10(34) of the Income Tax Act, 1916 (in short the Act ). In view of the same, invoking the provisions of section 14A of the Act, disallowance of ₹ 84,00,560/- was made as per Rule 8D of the Income Tax Rules. 3. Before the learned CIT (Appeals), it was argued by the assessee that the investments as appearing in the balance sheet .....

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sessee during the year are directly related to the taxable income earned by it, no disallowance on this account can be made. On the other expenses to be disallowed under section 14A of the Act, it was submitted that the Assessing Officer has to firstly arrive at a satisfaction that the claim of the assessee is incorrect and then only she may proceed to make disallowance under section 14A of the Act but in case of the assessee, the Assessing Officer has not pointed out any such specific expenditu .....

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nnot be said to be unavailable for conducting its business as clearly evident from the balance sheet. Thus, she was not convinced by the arguments put forth and heavy reliance on the case laws to advance its contention. She was of the considered opinion that the claim of the assessee cannot be accepted and consequently, the application of Rule 8D of the Income Tax Rules by the Assessing Officer to compute the expenses relating to earning of exempted income was upheld. However, on pointing out by .....

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ssessee reiterated the submissions made before the lower authorities. His contentions were two fold, firstly, he submitted that all the investments having been made by the assessee in earlier years and there being no interest expenses in those years, it cannot be said that the investments were made out of borrowed funds. Further it was brought to our notice that whatever interest expenditure is claimed during the year is mainly on account of CC limit raised from ICICI bank during the year only. .....

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nd to record her satisfaction as to how and why she is not agreed with the said submission of the assessee. In the absence of such satisfaction, no disallowance of expenses under section 14A of the Act can be made. 6. The learned D.R. relied upon the order of the Assessing Officer and further submitted that since Rule 8D of the Income Tax Rules is an integral part of the Statute, the Assessing Officer is bound by it and deduction has to be made as per Rule 8D of the Income Tax Rules only. 7. We .....

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of share application money to share allotment, as is evident from page 4 of the Paper Book. As such, it is quite evident that the investments were made in earlier year, no new investment has been made in the current year. From the perusal of Paper Book page 8, which is Annexure-20 to the Profit & Loss Account, it appears that no interest to bankor otherwise was paid in the earlier year, which goes to prove that the investments having been made in earlier year were made out of owned funds of .....

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ee income from these investments having earned. Therefore, any disallowance of interest expenditure being related to earning tax-free income cannot be made in this case. 8. There is no need to go further on the issue of disallowance of interest part of the expenses related to earning tax-free income, as from the explanation and evidences brought on record by the assessee, as stated hereinabove, it is proved beyond doubt that the interest expenditure incurred by the assessee during the year does .....

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