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2021 (10) TMI 419

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..... ) have erred in making the addition of Rs. 28,85,273/- u/s 14A read with Rule 8D without considering the various judgments and fact that the investments in mutual funds are managed through Portfolio manager Citi bank for which the bank has charged fees of Rs. 17,13,110/- for the year & the disallowance of Rs. 17,13,287/- has already been made by the assessee company in its return of income. No other expenditure has been incurred by the assessee company in this regard." 2. A perusal of the above ground of appeal reveals that the issue raised by the assessee in this appeal is relating to the confirmation of disallowance of Rs. 28,85,273/- made u/s 14A read with Rule 8D (2)(iii) of the Income Tax Rules, 1962 (hereinafter referred to 'the Rul .....

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..... t during the year, the assessee had made investment in mutual funds only, which were managed through Portfolio manager City bank, which has charged a fees of Rs. 17,13,110/- and in addition that STT amounting to Rs. 117/- was also paid . It was explained that no other expenditure was incurred by the assessee in respect of investment in mutual funds, therefore, the assessee company rightly disallowed of Rs. 17,13,110/- on account of expenditure relatable to earning tax exempt income. The Ld. Counsel for the assessee has also submitted that under similar circumstances, in the previous year, the Ld. CIT(A) has accepted the contention of the assessee and the disallowance was restricted to the fees paid to the Portfolio manager. However, this ye .....

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..... Ltd. vs CIT (372 ITR 694) (Del.) has held that section 14 of the Act or Rule 6D cannot be interpret so as to mean that the entire tax-exempt income of the assessee is to be disallowed. That the window for disallowance indicated in section 14A is only to the extent of disallowing the expenditure incurred by the assessee in relation to the tax-exempt income. This proportion or portion on the tax exempt income surely cannot swallow the entire amount of tax-exempt income. In the case, in hand, no disallowance is attracted on account of interest expenditure. The only disallowance attracted is in relation to the administrative expenses. The assessee has suo-moto disallowed the sufficient amount of Rs. 17,13,287/- on account of fees paid to the po .....

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