TMI Blog2020 (6) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iii) cannot exceed the exempt income earned. We find no merit in ground No.1 of the appeal, the same is dismissed, accordingly. Disallowance of Client referral fees - HELD THAT:- A perusal of the table furnished by the assessee clearly indicates that percentage of the fees paid in each year varies and there is no fixed pattern of payment of Client referral Fees. AO should have examined genuineness of the payments made rather than estimating by applying percentage of the earlier assessment year. In the facts of the case, we deem it appropriate to restore this issue back to the file of AO to verify genuineness of the payments made to the parties concerned. AO while verifying genuineness of the payments, shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - ITA NO.6490/MUM/2018 - - - Dated:- 12-6-2020 - Shri Vikas Awasth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakhs, own interest free funds of the assessee comprising of share capital and reserves and surplus are to the tune of ₹ 33.53 crores. The ld.Authorized Representative of the assessee submitted that the Hon'ble Supreme Court of India in the case of Hero Cycles Pvt. Ltd. Vs. CIT reported as 379 ITR 347 has upheld presumption theory that where both, interest bearing funds and own funds are available, the presumption would be, that own funds are utilised for making investment. The ld. Authorized Representative of the assessee further submitted that as regards disallowance under Rule 8D(2)(iii) is concerned, the assessee has made suo-motu disallowance of ₹ 10,000/-. The CIT (A) has enhanced disallowance to dividend income earned. The ld. Authorized Representative of the assessee prayed that the disallowance under rule 8D(2)(iii) may be restricted to suomotu disallowance made by the assessee. 3.1 In respect of ground No.2, the ld.Authorized Representative of the assessee submitted that the assessee has paid Client Referral Fees of ₹ 45,52,399/- as against total turnover of ₹ 3,28,17,19/- during the period relevant to the assessment year under appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii), the disallowance made by the Assessing Officer was unwarranted. The Demat charges were related to assessee s Share Broker business and were unrelated to earning of exempt income. As regards interest expenditure, the assessee has shown from the Balance Sheet as on 31/3/2012, that own funds of the assessee were much more than the investments made. It is a well settled legal proposition that were both, interest bearing and own interest free funds are available, it shall be presumed that investments are made from own funds. Hence, the disallowance made under rule 8D (2)(i) (ii) were uncalled for. In so far as disallowance under rule 8D (2)(iii) is concerned, the assessee has made suomotu disallowance of ₹ 10,000/- as against dividend income of ₹ 1,21,155/-. The Hon ble Apex Court in the case of PCIT v. State Bank of Patiala reported as 259 Taxman 314 (SC) has approved that disallowance under section 14A r.w. Rule 8D(2)(iii) cannot exceed the exempt income earned. We find no merit in ground No.1 of the appeal, the same is dismissed, accordingly. 6. In ground No.2 of the appeal, the assessee has assailed disallowance of Client referral Fees claimed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The reason for disallowing Client referral Fees that the percentage of fees paid in the earlier assessment years was comparatively lower and hence, the same has to be restricted to the same percentage is devoid of any merit. A perusal of the table furnished by the assessee clearly indicates that percentage of the fees paid in each year varies and there is no fixed pattern of payment of Client referral Fees. The Assessing Officer should have examined genuineness of the payments made rather than estimating by applying percentage of the earlier assessment year. In the facts of the case, we deem it appropriate to restore this issue back to the file of Assessing Officer to verify genuineness of the payments made to the parties concerned. The Assessing Officer while verifying genuineness of the payments, shall grant reasonable opportunity of hearing to the assesse, in accordance with law. The ground No.2 of the appeal is allowed for statistical purposes in the terms aforesaid. 7. In the result, appeal of the assessee is partly allowed for statistical purpose. 8. This appeal was heard on 20/02/2020. As per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly . The extraordinary steps taken suo motu by Hon ble jurisdictional High Court and Hon ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which ITA No. 6103 and lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was requi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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