TMI Blog2018 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08, 2008-09 and 2009-10 has confirmed a disallowance of ₹ 12,44,930/- (Rs.29,96,221/- minus ₹ 12,44,930/-). Thus the Ld. CIT(A) has given a relief of ₹ 17,51,291/-. As the above order of the Ld. CIT(A) is based on a comparative analysis being contextual, we confirm the same and uphold the disallowance of ₹ 12,44,930/-. Accordingly, the above grounds of appeal are dismissed. - ITA No. 4044/MUM/2016, ITA No. 4045/MUM/2016, ITA No. 4046/MUM/2016, ITA No. 4242/MUM/2016, ITA No. 4246/MUM/2016 And ITA No. 4249/MUM/2016 - - - Dated:- 25-4-2018 - SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For The Assessee : Mr. Y.P. Trivedi., Senior Advocate For The Revenue : Ms. S. Padmaja, CIT(DR) ORDER PER BENCH The captioned cross appeals- three by the assessee and the three by the Revenue are directed against the order of the Commissioner of Income Tax (Appeals)-54, Mumbai [in short CIT(A) ]and arise out of the assessment completed u/s 143(3) r.w.s. 153A of the Income Tax Act 1961 (the Act ). As common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the year under consideration and therefore, it is not a fit case for resorting to disallowance u/s 14A r.w. Rule 8D either by the AO or the Ld. CIT(A). On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. The issue whether disallowance u/s 14A r.w. Rule 8D can be made in a case when there is no exempt income is no longer res integra. In the case of CIT v. Shivam Motors (P) Ltd. (2015) 55 taxmann.com 262 (All), it has been held that in absence of any tax free income earned by the assessee, disallowance u/s 14A could not be made. In a similar vein, it has been held in Cheminvest Ltd. v. CIT (2015) 61 taxmann.com 118 (Del) that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. In CIT vs. Chettinad Logistics (P) Ltd. (2017) 80 taxmann.com 221 (Mad), the Hon ble Madras High Court has held that section 14A cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. In view of the above position of law, we delete the disallowance of ₹ 26,20,720/- confirmed by the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts amongst customers and associates on auspicious occasions like Diwali and stated that the expenses incurred were out of commercial expediency and thus allowable u/s 37 of the Act. As the involvement of personal/non-business element in these expenses cannot be ruled out, the AO made a disallowance of ₹ 5,25,000/- out of the above expenses. The assessee has claimed expenses of ₹ 37,94,322/- on account of gifts. The AO observed that some of these expenses include such expenses which are not wholly and exclusively for the business purpose. As the assessee failed to bring complete verifiable documentary evidence, the AO made a disallowance of ₹ 19,00,000/- on estimated basis. The assessee had claimed expenses of ₹ 19,01,684/- on account of Diwali/Puja expenses. The AO found that (i) the assessee failed to file complete verifiable documentary evidence on record, (ii) most of the payments in respect of these expenses were stated to the made in cash and supported by only self-made vouchers. In view of the above, the AO made a disallowance of ₹ 2,70,000/- on estimated basis. The assessee had claimed a sum of ₹ 3,01,221/- on account of Chandl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Diwali Pooja Expense 1091128 891128 200000 100000 100000 Gift Expenses 979311 679311 300000 150000 150000 Chandla Expenses 257390 ---------- 257390 128695 128695 2327829 1570439 757390 378695 378695 Assessment Year 2007-08 Diwali Pooja Expense 200000 Ad-hoc relief in total Gift Expenses 468475 Chandla Expenses 403497 Business Promotion 500000 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 out of total disallowance of ₹ 15,71,972/-, out Business promotion expenses. Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of ₹ 6,35,986/-, i.e. confirmed 40.45% of disallowances. Similarly, in A.Ys. 2008-09 out of total disallowance of ₹ 17,41,127/-, out Business promotion expenses, Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of ₹ 7,20,564/-, i.e. confirmed 41.39% of disallowances. In A.Y. 2009-10 out of total disallowance of ₹ 20,88,927/-, out Business promotion expenses, Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of ₹ 8,94,464/-, i.e. confirmed 42.82% of disallowances. Hence, in A.Ys. 2007-08, 2008-09 and 2009-10, the average percentage of disallowance confirmed by the Hon ble ITAT works out to be 41.55%. Respectfully fallowing the decisions of the Hon'ble ITAT in appellant's own case for A.Ys. 2007-08, 2008-09 and 2009-10, the disallowances made by the Ld. AO out of Business promotion expenses, Gift expenses, Diw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 14A of the Income Tax Act, 1961 ignoring the fact that the provisions of Section 14A apply even if no exempt income is actually earned or received during the year in any form whatsoever. 16. As mentioned at para 4 hereinbefore, the assessee has not earned any exempt income during the year under consideration. Therefore, our decision at para 7 is equally applicable while deciding the above two grounds of appeal. Accordingly, the above two grounds of appeal filed by the Revenue are dismissed. 17. The 3rd ground of appeal reads ad under: Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in holding that only a part of the expenditure prohibited by law can be disallowed u/s 37(1) of the Income Tax Act, 1961 contrary to the fact that the entire expenditure ought to be disallowed in terms of Section 37(1), as the payment is admittedly in the nature of speed money paid in cash and illegal as per law as also against the public policy. 18. During the course of assessment proceedings, the AO noticed that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. at various ports. These expenses were made to various government agencies, and the assessee failed to prove that these are in the nature of business expenses. The AO observed that there is no provision under the Act to partially allow any expenditure incurred by the assessee. Referring to section 37(1), the AO held that the expenditure incurred by the assessee should be wholly and exclusively for the purpose of business and should not be for the purpose which is an offence prohibited by law. The assessee has disallowed in its return of income an amount of ₹ 82,27,656/- (being 25% of ₹ 3,29,10,623/-). Therefore, the AO made a disallowance of the balance amount of ₹ 2,46,82,967/-. 19. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) observed that for the AYs 2004-05, 2005-06 and 2006-07, similar disallowance was made by the AO and the CIT(A) following the order of the Tribunal in assessee s own case directed the AO to restrict the disallowance to 25%. Against the said order of the CIT(A), the Revenue filed an appeal before the ITAT, Mumbai in ITA No. 8190, 8191 and 8192/Mum/2011 and the Tribunal vide its or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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