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ACIT, Central Circle-13 New Delhi Versus Bhushan Energy Ltd. And Vice-Versa

Disallowance under section 14-A - genuineness of the expenditure - Held that:- Considering Cheminvest Limited Versus Commissioner of Income Tax-VI [2015 (9) TMI 238 - DELHI HIGH COURT] assessee earned only exempted income in a sum of ₹ 1,75,063/- which is already added to the income of the assessee. Therefore, no further disallowance should be made on the matter in issue. We accordingly set aside the orders of the authorities below and delete the entire addition. In the result appeal of as .....

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SHRI BHAVNESH SAINI, JUDICIAL MEMBER For The Assessee : Shri Ashwani Kumar, CA And Shri Aditya Kumar, CA For The Department : Shri S.K. Jain, Sr. DR Per BHAVNESH SAINI, Judicial Member ORDER Both the cross appeals are directed against the order of Ld. CIT(A) I, New Delhi dated 8th May, 2014 for asstt. year 2011-12. 2. We have heard Ld. Representative of both the parties and perused the material on record. 3. The assessee filed the appeal on the following ground:- 1. That the order dated 8.5.201 .....

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l provisions of the Income-tax Act, 1961 by ignoring the factual position and the submissions made on behalf of the Appellant Company. 4. The revenue has filed the appeal on the following grounds :- 1.The order of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of ₹ 8,52,27,557/- on account of disallowance u/s 14A read with rule 8D made by the AO. 3. On the facts and circumstances of the case the Ld .....

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d disallowed a sum of ₹ 1,75,063/- u/s 14A of the I.T. Act. AO however did not accept contention of the assessee and noted that as per provision of section 14A, it is not at all mandatory that assessee should have actually earned the exempt income or even that he should have actually incurred any expenses for earning such income during the year under consideration. The AO applied Rule 8D of the I.T. Act and relied upon order of ITAT Delhi Bench in the case of ACIT vs. Cheminvest Ltd. 317 I .....

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xpenditure was relatable to its manufacturing / business activities i.e activities distinct from passive activity of investment in shares. Ld. CIT(A) following the decision of the Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT 347 ITR 272 (Delhi) substantially accepted the explanation of assessee because the interest expenditure of the assessee was entirely attributable to the funds raised from the financial institutions for setting up the 150 MW power plant in Orissa. The disall .....

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ls were also shown by reducing the exempt income u/s 10 of the I.T. Act. He has therefore submitted that the disallowance u/s 14A could not be more than the exempt income of ₹ 1,75,063/- which assessee has already added to the income, as per computation of income filed on record. He has therefore submitted that no further addition is required in the matter. He has relied upon decision of Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT ITA No. 117/2015 dated 25th Februar .....

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75,063/- as exempt income from its investments. The assessee has added the same in computation of income and later on reduced the same u/s 10 of the I.T. Act. Therefore assessee has disallowed entire amount of ₹ 1,75,063/- u/s 14A r.w.r. 8D of the I.T. Act. Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT (supra) in para 9 and 10 held as under :- 9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing &# .....

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nmindful is that whereas the entire tax exempt income is ₹ 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., ₹ 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred bv the assessee in relation to the tax exempt income&qu .....

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