TaxTMI 
TaxTMI 
TaxTMI 
2011 (6) TMI 903
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....ded by this common order for the sake of convenience. 2. The effective grounds raised by the Revenue in appeal no.3145/Ahd/2010 for the assessment year 2004-05 read as under: "1. The Ld. Commissioner of Income-tax (A) has erred in law and on facts in annulling the assessment order dated 9/12/2009 passed u/s.143(3) r.w.s. 147 of the Act. 2. The Ld. Commissioner of Income-tax (A) has erred in law and on facts in deleting the disallowance of proportionate expenses of ₹ 10,18,445/- u/s. 14A against exempt income u/s.10B is deleted. 3. The Ld. Commissioner of Income-tax (A) has erred in law and on facts in deleting the disallowance U/s.14A with reference to dividend income of ₹ 1,32,715/- exempt u/s. 10(35)." 2.1 The effective ....
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....there was audit objection issued by the audit party for assessment year 2004-05 (placed at page nos.31 and 32 of the paper book). In the said audit note it is mentioned that proportionate expenses of ₹ 1018445/- and ₹ 132715/- incurred in relation to income exempt under section 10B and section 10(35) respectively was not disallowed as per provisions of section 14A of the Act. Similarly, there was audit objection for the assessment year 2005-06 (placed at page 85 of the paper book). It was observed that proportionate expenses of ₹ 2630434/- incurred in relation to income exempt under section 10B was not disallowed as per provisions of section 14A of the Act. 2.3 The ITO did not accept the audit objection and replied to aud....
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....uced hereunder: "4.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. Briefly stated the contentions of the learned A. R. are as follow. Exemption u/s. 10B was allowed after excluding the expenses related to such income. The said exemption was quantified in accordance with Sec. 10B(4). Therefore applying the provisions of Sec. 14A results in duplicating the exercise and is not called for. I am inclined to agree with these contentions. Further it is seen that similar issue rose in the A. Y. 2003-04. My predecessor vide the order dated 20-09-2006 in appeal No. CIT(A)-XI/79-3/2006-07, held as under :- "While computing the deduction u/s. 10B the ....
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....stified in annulling the same. On disallowance made under section 14A, the ld. D.R. pointed out that disallowance was rightly done and ld. CIT(A) is not justifying in deleting the same for both the assessment eyars. 6. On the other hand, Shri Mukesh M. Patel, A.R., appearing on behalf of the assessee, vehemently supported the order of the ld. CIT(A). The Counsel of the assessee submitted that assessments for both the assessment years were completed under section 143(3) and the reopening is bad in law, keeping in view the judgment by the Hon'ble Supreme Court in the case of Eastern Newspapers Soc. Vs. CIT reported in 119 ITR 996(SC). The ld. CIT(A) called the remand report and the AO, in the remand report, submitted that the reopening was d....
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....s held that unless investments were made out of borrowed funds for earning the exempt income, no disallowance of interest under section 14A can be made. 7. Having heard both the sides, we have carefully gone through the orders of the authorities below. It is pertinent to note that the reopening of assessment for both the assessment years was done on the basis of audit objection. No independent reasons was recorded by the A.O. Therefore, the ratio of decision of the Hon'ble Gujarat High Court in the case of Adani Exports is squarely applicable to the facts of assessee's case. We are, therefore, of the view that the ld. CIT(A) is fully justified in annulling the assessments for both the assessment years. Hence, ground no.1 for both the asses....