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TMI Blog2018 (4) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 6,05,122/-. The Commissioner(A) erred in not considering the submissions of the assessee company to the effect that the closing balance in the investment in the mutual funds and equity shares had reduced by Revenue by: Shri Rajesh Kumar Yadav ( DR) Assessee by: B.V. Jhaveri (AR) Rs. 5.81 lakhs in comparison to the opening balance in investment in mutual funds and equity shares and, therefore, no portion of the borrowed funds wee utilized in making investment during the year under consideration and, hence, interest of Rs. 3,81,674/- could not be disallowed u/s 14A of the Act. (11) Disallowance of professional fees of Rs. 22,94,400/- 3. The CIT(A) erred in confirming the disallowance of professional fees of Rs. 22,94,400/- paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was engaged in the business of Manufacturing of Automobile Forgings, automobile & auto parts. On verification, it was noticed that the assessee has shown exempt dividend income to the tune of Rs. 10,23,241/- but no disallowance u/s 14A of the Act was made. Thereafter, the notice was given and after getting the reply the expenditure to incur the exempt income was assessed to the tune of Rs. 6,05,122/-. It was also noticed that on dated 31.03.2008 there was unutilized MODVAT credit of Rs. 5,37,826/-. Thereafter, the notice was given to the assessee and after the reply of the assessee, the said MODVAT credit was added to the income of assessee u/s 145A of the Act. The assessee paid the Professional Fees to the tune of Rs. 22,94,400/- to M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not make any fresh investment in the year in question. Since the investment of the assessee was from his own funds, therefore, there can be no disallowance on account of the interest expenditure in view of the provision u/s 14A r.w. Rule 8D of the Act. In this regard we also find support of the law settled in CIT Vs. HDFC Bank Ltd. (366 ITR 505, Bom).. Therefore, in the said circumstances, we delete the interest disallowance. In respect to the disallowance of Rs. 2,33,448 u/r 8D(2)(ii)(0.5% of the average investment) is concerned, the assessee relied upon the order passed by the ITAT in the assessee's own case for the assessment year of 2007-08. The finding of the Hon'ble Tribunal is hereby reproduced below:- "We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 10,19,208/- which was claimed as exempt income u/s10(34) of the Act and the Ld. CIT(A) has restricted the disallowance u/s 14A to Rs. 1 lac. In our considered view, the disallowance of Rs. 1 lac u/s 14A of the Act keeping in view factual matrix of the case is quite reasonable. The AO has not undertaken any exercise to work out the disallowance having regard to the accounts of the assessee and merely applied Rule 8D of I.T. Rules, 1962 in a mechanical manner which cannot be applied for the A.Y. 2007-08 and earlier years in view of Hon'ble Bombay High Court decision in the case of Gdrej and Boyce Manufacturing Company Limited (supra). Keeping in view of the peculiar facts and circumstances of the case, the ground raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the opening stock of subsequent year. Delhi high court in case of CIT v/s Mahavir aluminum Ltd interpreted the Law in this regard. CBDT circular N.772 Dt 23.12.1998 also clarify the object of insertion of section 145A. Anyhow, both the plea seems to justifiable but the unutilized MODVAT credit of Rs. 5,37,826/- is not the income of the assessee, therefore, the same is not liable to be added as income of the assessee. Accordingly, we delete the said addition and decide this issue in favour of the assessee against the revenue. ISSUE NO.3:- 7. Under this issue the assessee has challenged the confirmation of disallowance of Professional Fees to the tune of Rs. 22,94,400/-. The Ld. Representative of the assessee has argued that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies which has been shown by the assessee to earn the interest @ of 10% to 11%. The assessee company has relied upon the letter dated 02.02.2007 issued by the M/s Viniyog Investment & Trading Co. Pvt. Ltd., in which the said company has shown annual fees to the tune of Rs. 21,00,000/- which can be raised monthly. The said offer was accepted by the Assessee in view of letter dated 06.02.2007 which lies at page no. 73 of the paper book. The assessee company has also shown the company in which the assessee company earned the interest @ 10% to 11% and the said list which lies at page no. 71 of the paper book. No other document has been placed on record in support of this contention. Since, the company is related company and no working of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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