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2017 (11) TMI 1683

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..... be met in the instant case if further disallowance of expenditure u/s 14A is kept at an additional amount of ₹ 1,00,000/- towards administrative/misc. expenses to be added to the income of the assessee - Decided partly in favor of assessee. - I.T.A. No. 3320/Mum/2016 - - - Dated:- 9-11-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For the Appellant : Shri Rakesh Mohan For the Respondent : Shri T.A Khan ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 3320/Mum/2016 for assessment year 2011-12, is directed against the appellate order dated 22.02.2016 passed by learned Commissioner of Income Tax (Appeals)-53, Mumbai (hereinafter ca .....

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..... 3) r.w.s. 143(2) was not made in accordance with Rule 8D of Income-tax Rules, 1962. The assessee was asked by the AO to explain that why disallowance of expenditure should not be made u/s. 14A r.w.r. 8D . The assessee submitted before the AO as under:- It is further submitted that all the investments on which dividend was earned were made from the assessee s own internal accruals and not from borrowings. Consequently it is submitted that no finance cost is incurred for earning of dividend income. The A.O keeping in view of the statutory provisions of the Act u/s 14A r.w.r 8D made the disallowance of ₹ 16,67,098/- under Rule 8D(2)(iii) by applying formula of 0.5% on average investment of ₹ 33,34,19,500/- and since the a .....

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..... .w.s. 14A can be invoked only when the A.O is not satisfied about the correctness of the claim of the assessee and since A.O has not recorded dissatisfaction no disallowance can be made by invoking Rule 8D r.w.s. 14A. It was submitted that the investment in Akash Electronics to the tune of 2624.85 lakhs is in subsidiary company/sister concern of the assessee which investment was made for increasing business of the assessee in domestic industry , thus this investment is for the purpose of the business and not with the intention to earn dividend income. It was submitted that the AO included this investment also for making disallowance u/s 14A of the Act r.w.r. Rule 8D(2)(iii) . The assessee relied upon decision of the tribunal in the case of .....

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..... the tune of 0.5% of average value of investments as was done by the AO and the appeal of the assessee was dismissed by learned CIT(A). 5. Aggrieved by the decision of learned CIT(A) , the assessee has come in appeal before the tribunal . The ld. Counsel for the assessee submitted that disallowance at the rate of 0.5% of average value of investments has been made under Rule 8D(2)(iii) r.w.s. 14A by the authorities below which led to the disallowance of ₹ 16,67,098/- wherein the assessee has voluntarily disallowed ₹ 34,692/- by applying disallowance @0.5% of salary of GM(Finance). It was submitted that for A.Y 2008-09 vide ITA No. 6788/Mum/2011 vide orders dated 29-05-2015 in assessee s own case , the tribunal has held that si .....

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..... ich are in the nature of personnel expenses to the tune of ₹ 92.25 crores, other/administrative expenses by the way of rent of ₹ 7.8 crores , rates and taxes to the tune of ₹ 4.44 crores and miscellaneous/administrative expenses to the tune of ₹ 30.85 crore which included professional fee of ₹ 3.20 crores, Printing and stationary expenses of ₹ 1.21 crore, tax-audit fee of ₹ 4 lacs , auditors remuneration of ₹ 4.68 lacs, internal audit fee of ₹ 22.2 lakhs, sitting fee of ₹ 1.25 lakh etc to uphold the disallowance based on Rule 8D(2)(iii) r.w.s. 14A after arriving at the conclusion that the claim of the assessee of applying 05% to salary of GM(Finance) to arrive at disallowance u/s 1 .....

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..... as to be made to Rule 8D in the midst of incorrect claim of the assessee. Rather, a superficial examination of the expenses of the company was made by the learned CIT(A) to justify that formula prescribed in Rule 8D(2)(iii) is to be applied and claim of the assessee is not correct. The assessee is mainly dealing in the electronics products and has turnover of more than ₹ 2000 crores during the impugned assessment year and exempt dividend income is merely ₹ 44.69 lacs as against the investment of ₹ 26.54 crores held at the end of the year. The assessee has undertaken activity/transactions of sale of mutual funds during the previous year relevant to the impugned assessment year which led to decline in investment as at year a .....

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