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TMI Blog2017 (8) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A)- 6/208-09 and 153/CIT(A)-6/2010-11 dated 20.03.2015 for assessment years 2005-06 and 2007-08, respectively. The revenue filed the cross appeal in ITA No. 1918/15 against the order of the Commissioner of Income Tax (Appeals) for ay 2005-06. 2. In the assessment made for assessment years 2005-06 and 2007-08 respectively, the AO found that the assessee has invested substantial amounts in shares/mutual funds and earned dividend of Rs. 1,28,16,649/- and 4,29,59,915/- , respectively , and claimed them as exempt u/s. 10(34). The assessee has considered only Rs. 46,600/- and 92,000/- as expenditure attributable to such investments and earning of dividends in the respective assessment years. The AO invoked the provisions of section 14A r.w.r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved, the assessee filed appeals before the CIT(A). 3. The CIT(A) following the judgements of the Bombay High Court in the case of Godrej Boyce Mfg Co Ltd Vs DCIT (328 ITR 81) (Bom) and this Tribunal decision in the case of ACIT Vs Celebrity Fashions Ltd in ITA No. 1318 & 1319/Mds/2011 dated 30.04.2012, held that even prior to assessment year 2008-09 (pre Rule 8D era) disallowance u/s. 14A(1)is to be made on a rational basis and disallowance of expenses u/s. 14A(1) @5% of the exempt income earned during the year could be a reasonable basis and accordingly restricted the disallowance made by the AO for assessment years 2005-06 and 2007-08 to Rs. 6,40,832/- and 21,47,996/-, respectively. With regard to the disallowance of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted and remitted the TDS into Government account, subject to verification and assessee's furnishing of necessary evidence. Aggrieved against these orders, the assessee filed these appeals. Since, they are inter-connected, they are heard together and disposed by a common order. 4. We heard the rival contentions, gone through relevant orders and materials. The above issues are disposed as under: 4.1 On the disallowance of expenses u/s. 14A r.w.r. 8D: The AR pleaded that the Ld. CIT(A) erred in confirming the disallowance to the extent of 5% u/s. 14A(1) relying on the decision in the matter of Celebrity Fashions Ltd., which is wholly inapplicable in the circumstances of the present case. Per contra, the DR relied on the orders of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions and gone through the orders. The assessee had made provision for warranty at Rs. 7,50,41,484/- in the books of account and the AO refused to allow it for the reason that this provision for warranty was credited without any scientific reasons. Thus, the contention of the assessee is that the provision is an ascertained liability, whereas, the revenue observed it as contingent liability. It is clear from the assessment order that the assessee could not explain the methodology and calculation of the provisions on the basis of the satisfactory aspects of Apex Court in the case of Rotork Controls India Ltd. (Supra). In the circumstances, we are of the opinion that the matter has to be reexamined as to whether the methodology a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or draft or by any other mode, whichever is earlier. It is clear that when the assesse has made the provisions i.e., when it has credited such sum to the account of the subcontractors/labour/their contractors, it should have deducted TDS but failed to do so. In view of that, the findings recorded by the CIT(A) do not require any interfere on these grounds. Further, we find merit in the decision of the CIT (A) in allowing the alternate claim by directing the AO to examine as to whether the impugned amounts were subsequently directly credited to the respective sub-contractors account/respective persons account, necessary TDS was deducted and remitted to the Government in the subsequent year and if so to allow necessary deduction in the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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