TMI Blog2019 (8) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has considered identical issue and after considering relevant facts came to the conclusion that considering nature of business of the assessee expenditure incurred towards business promotion is in significant and also it is a customary that the assessee which is in the entertainment business has to incurred certain expenditure for the customers/clients to keep them in good relations - In this view of the matter and consistent with view taken by the Coordinate bench, we direct the AO to delete the additions towards business promotions expenses. Addition u/s 14A - disallowance of expenditure incurred in relation to exempt income - HELD THAT:- This year, the assessee has made out a case with necessary details that its own funds is in excess of investments in shares, therefore, no part of interest bearing funds has been used to make investments in shares consequently, no disallowance could be made in respect of interest expenditure. We direct the AO to delete additions made towards proportionate interest expenditure under Rule 8D(2)(ii) I.T. Rules 1962. In so far as disallowance of expenditure under Rule 8D(2)(iii) @ 0.5% of average value of investments, we find that the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st expenditure under Section 14A of the Act aggregating to ₹ 41,107/- as attributable to borrowings purportedly utilized for acquiring investments, yielding exempt dividend income. Having regard to the facts and circumstances of the case, the Appellant submits that the unwarranted and arbitrary disallowance be deleted. 5) Without prejudice to the Appellant's contention that no interest is allocable to the earning of exempt dividend income and in any view of the matter, the Appellant submits that the disallowance computed at ₹ 41,107/- is arbitrary and grossly excessive and the same requires to be reduced substantially. 6) The learned Commissioner of Income Tax (Appeals) erred in upholding disallowance of expenditure under Section 14A of the Act aggregating to ₹ 2,24,037/- towards the earning of dividend income by placing reliance on clause 2(iii) of Rule 8D of the I.T. Rules, 1962 without out appreciating that the Appellant had suo-moto disallowed an amount of ₹ 64,505/- in the Return of Income furnished. Having regard to the facts and circumstances of the case, the Appellant submits that the unwarranted and arbitrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration from ground No.1 of assessee appeal is determination of ALV of house property @10% of original cost of property. The assessee firm had rented out its flat situated at Bakhtavar Building, Opp. Colaba Post Office Mumbai to Ms. Simone Tata at ₹ 600/- per month from AY 2005-6 to 2008-09 and ALV of the property was taken at ₹ 12,32,505/- by the AO. Similarly, for the year under consideration by following his finding in earlier year determined ALV of the property at ₹ 12,30,505/- and after allowing standard deduction at 30% made additions of ₹ 8,62,243/- under the head income from house property.. 5. The Ld. AR for the assessee, at the time of hearing submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai E Bench in assessee s own case for AY 2009-10 where, under identical set of facts, the Tribunal has set aside the issue to the file of the AO to determine ALV of the house property in light of decision of Hon ble Jurisdictional High Court in the case of CIT vs. TIP Top Typography (368 ITR 330). Facts being identical for the year under consideration, the issue may be set aside to the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the file of the Assessing officer for denovo adjudication. All contentions are left open. The Assessing officer shall provide opportunity of being heard to the assessee and to furnish fresh evidences and submissions in support of its contentions. This ground is allowed for Statistical purpose. 7. In this view of the matter and consistent with view taken by the Coordinate Bench in assessee s own case for earlier year, we restore this issue to the file of the AO for denovo adjudication in light of findings of the Tribunal on the basis of decision of Hon ble High Court in the case of CIT vs TIP TOP Typography (Supra). 8. The next issue that came up for our consideration from ground No. 2 and 3 of assessee s appeal is Adhoc disallowance of business promotion expenses. The AO has disallowed business promotion expenses amounting to ₹ 2,78,160/- on the ground that a similar disallowance has been made for AY 2006-07 by considering the fact that the assessee has debited various business promiton expenses which are in personal nature like hotel expenses, entertainment expenses, gifts and restaurant bills and by no stretch of imagination it can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade towards business promotion. Ground No.4 is allowed. 11. In this view of the matter and consistent with view taken by the Coordinate bench, we direct the AO to delete the additions towards business promotions expenses. 12. The next issue that came up for our consideration from ground No.4 to 7 of the assessee s appeal is disallowance of expenditure incurred in relation to exempt income. The AO has disallowed expenditure incurred in relation to exempt income towards interest expenditure and other expenses under Rule 8D(2)(ii)and (iii) for ₹ 3,40,027/- on the ground that although assessee claims have not incurred any expenditure, but in view of the decision of Hon ble Bombay High Court in the case of Godrej Boyce manufacturing company Pvt.Ltd. vs. DCIT (supra), it is mandatory to determine expenses incurred in relation to exempt income under the prescribed method provided u/s Rule 8D(2)(ii) of I.T.Rules, 1962. Accordingly, he has determined disallowance of ₹ 3,40,029/- in respect of interest expenditure and 0.5% of the average value of the investments. 13. The Ld. AR for the assessee submitted that this issue is als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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