TaxTMI 
TaxTMI 
2016 (9) TMI 207
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....cumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of Rs. 1,41,991/- made by AO by invoking the provisions of Rule 8D read with Section 14A of the Act. (ii) That the above-said disallowance has been confirmed rejecting the explanation and evidences brought on record by the assessee. 3(i) On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the action of AO in disallowing an amount of Rs. 1,50,763/- being 1/6th of the following expenses. Particulars Amount (Rs.) Car repairs and maintenance 3,13,549/- Interest on car loan 49,014/- Insurance on car 18,952/- Telephone expenses ....
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....4,689/- was reflected in the capital account of the assessee. The AO asked the Assessee to show cause as to why disallowance u/s. 14A may not be made. Assessee replied vide his letter on 19.12.2013, which was not acceptable to the AO in accordance with the provisions of Section 14A. AO held that assessee has diverted its fund for non-business purposes claiming that the idle funds were utilized for earning incomes and on the other side, assessee was incurring interest expenses and claim was made that these were business expenses. Therefore, the AO calculated the disallowance as per the provisions of Rule 8D of the I.T. Rules and made the disallowance of Rs. 1,41,991/- and also made adhoc disallowance of Rs. 1,77,892/- being 1/6th of total ex....
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....s regards disallowing an amount of Rs. 1,50,763/- being 1/6th of the following expenses : Particulars Amount (Rs.) Car repairs and maintenance 3,13,549/- Interest on car loan 49,014/- Insurance on car 18,952/- Telephone expenses 1,52,613/- Travelling expenses 3,22,571/- Entertainment/ staff welfare expenses 47,875/- Total 9,04,574/- The ld. Counsel of the Assessee stated that the above disallowances has been made without any basis. These disallowance have been made despite the fact that these expenses have been incurred for the purpose of business and profession. To support his contention, he relied upon the following case laws and stated that the issue in dispute is squarely covered by the....
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.... found that assessee was having own funds which were more than the investment made and therefore, no disallowance under section 14A is sustainable in the eyes of law. My view is fortified by the following decisions:- CIT Vs Taikisha Engineering India Ltd. (Delhi High Court) ITA 115/2014 & 119/2014 dated 25-11-2014 Disallowance of expenses on exempt income uls 14A r.w Rule 80 - investments in shares and mutual funds - Held that:- In Maxopp Investment Ltd. vs. Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] it has been held that it is only when the AO is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed - the findings recorded by the C....
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....the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, the disallowance made by the AO and confirmed by the Ld. CIT(A) is deleted and the issue in dispute raised by the Assessee is allowed. 8. With regard to second addition in respect of adhoc disallowance made by the AO in respect of 1/6th of the aforesaid expenses as mentioned in a tabulation form in para 5.1 of this order is concerned, I find that Ld. CIT(A) while recording his finding has pointed out that AO had made the disallowance without pointing out any specific defects in the books of accounts. Despite that he only allowed the claim of depreciation on vehicle and rest of the disallowance affirmed, which is not sustainable in the eye....