TMI Blog2017 (6) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment year 2008-09. In the above case it upheld the disallowance to the extent to 2% of the total exempt income. Respectfully following the above decision, we direct the AO to restrict the disallowance to 2% of the total exempt income. Disallowance of interest - Assessee had paid interest @ 13% to the Directors - Held that:- A perusal 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en his finding but send it back to the A.O. ii. The assessing officer has erred in disallowing PMS fees deductable in working out the 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 has erred in initiation of penalty proceeding u/s 271 (1)(c) of the Income Tax Act, the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 constitute a reasonable estimate for making disallowance in the years earlier to the assessment year 2008-09. In the above case it upheld the disallowance to the extent to 2% of the total exempt income. Respectfully following the above decision, we direct the AO to restrict the disallowance to 2% of the total exempt income. Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel of the assessee submits that the rate adopted 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.37,52,678/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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