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M/s. Streamline Shipping Co. P. Ltd. Versus DCIT 3 (3) , Mumbai

2017 (6) TMI 777 - ITAT MUMBAI

Disallowance u/s 14A r.w.r. 8D - Held that:- In the instant case, the assessment year is 2007- 08. We find that the AO has worked out the disallowance u/s 14A r.w.r. 8D. The same rule is not retrospective as it was notified on 24/03/2008 and would be applicable only from AY 2008-09. In Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) it has been held that Rule 8 D is not retrospective. The Hon’ble Bombay High Court in CIT vs. M/s. Godrej Agrovet Ltd vide [2014 (8) TMI 457 - BOM .....

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of the ‘Party Advice’ given by Union Bank of India, Mumbai indicates that the terms and conditions state that ‘profits should be ploughed back so as to strengthen equity base and improve debt equity ratio’. It has been held that the disallowance of interest is justified when the amount borrowed had not been used for the purpose of business but for advancing money to Managing Director without interest. - The contention of the assessee that the total rate of interest including exchange fluctua .....

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ed:- 28-4-2017 - Shri Joginder Singh ( Judicial Member ) And Shri N. K. Pradhan ( Accountant Member ) Assessee by : Shri M. Subramanian, AR Revenue by: Shri Vishwas Mundhe, DR ORDER Per N. K. Pradhan, AM This is an appeal filed by the assessee. The relevant assessment year is 2007-08. The appeal is directed against the order of the Commissioner of Income Tax (Appeals) - 07, Mumbai and arises out of order u/s 143(3) of the Income Tax Act, 1961 (the Act ). 2. The grounds of appeal filed by the ass .....

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short term capital of ₹ 1,27,640/-. The PMO fees has not been written off to the profit and loss account, but incurred to improve the investment in shares, the CIT(A) (7) has up held the view of A.O. without giving his view at all. iii. The assessing officer has erred in disallowing and adding to income sum of ₹ 4,48,137/- as excess interest paid to directors and share holder. The CIT(A) - 7 has upheld the view of the A.O. without giving his views at all. iv. The assessing officer ha .....

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Officer (A.O.) computed the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules, 1962 and made a disallowance of ₹ 1,79,709/-. 3.1 In appeal, the learned CIT(A) directed the A.O. to follow the judgement of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. Dy. CIT (2010) 194 Taxman 203. 3.2 Before us, the learned counsel of the assessee submits that the assessee-company has utilised its surplus funds and given the amount to be invested to Kotak Mahend .....

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case, the assessment year is 2007- 08. We find that the AO has worked out the disallowance u/s 14A r.w.r. 8D. The same rule is not retrospective as it was notified on 24/03/2008 and would be applicable only from AY 2008-09. In Godrej & Boyce Mfg. Co. Ltd. (supra), it has been held that Rule 8 D is not retrospective. The Hon ble Bombay High Court in CIT vs. M/s. Godrej Agrovet Ltd vide Income Tax Appeal No. 934 of 2011, dated 8.1.2013, has held that percentage of the exempt income can consti .....

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nd of appeal is treated as dismissed, not being pressed. 5. Now we come to the 3rd ground of appeal. During the course of assessment proceedings, the A.O. found that the assessee had paid interest @ 13% to the Directors. The assessee was paying interest @ 8.71% to Union Bank of India. The A.O. observed that the assessee had access to cheap funds and the market rate of interest during the relevant financial year was around 9%. Therefore, he calculated the disallowance in the following manner: Nam .....

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ted by the A.O. @ 9% on the pretext that the interest paid to Union Bank of India is at 8.71% whereas the actual rate paid to the said bank is 13.06%. The calculation filed by the learned counsel is extracted below: Total interest paid to Union Bank of India Rs.3,76,947/- Financial charges due to exchange fluctuation (please refer to the addition to the fixed assets schedules against item containers) Rs.1,13,190/- Total cost of funds (interest) Rs.4,90,137/- Average amount of loan outstanding Rs .....

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