TaxTMI 
TaxTMI 
2017 (2) TMI 578
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....mounting to Rs. 6.28 lakhs.During the assessment proceedings, the AO found that assessee had received a dividend income of Rs. 50,944/- and had claimed the same as exempt from tax u/s.10 (34) of the Act.He directed the assessee to submit details of expenditure incurred in relation to above exempt income and to file working of disallowance as per section 14 A read with rule 8D of the Income Tax Rules,1962 (Rules). After considering the submissions of the assessee, the AO made a disallowance of Rs. 8.28 lakhs (Rs. 7.46 lakhs under the head interest expenditure and Rs. 82, 210/-on account of 0.5% of the average investments for the year under consideration). As the assessee itself had made disallowance of Rs. 2 lakhs, so, he restricted it to Rs. 6.28 lakhs. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before her,it was argued that the assessee had not incurred any admission to expenses to all exempt income, that it had disallowed 10% of salary of executives and 15% of administrative overheads i.e.Rs. 2 lakhs on its own. After considering the submission of the assessee and the assessment order, the FAA held that....
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....ailable both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments." Section 14A was introduced to prevent the misuse of double deductions i.e. claiming exemptions against the exempt income so that disallowance has to be restricted to exempt income only. Here, we would like to reproduce relevant portion of the judgment of Joint Investments(supra), of Hon'ble Delhi High Court and it reads as under: "Section 14A or rule 8D of the Income-tax Rules, 1962, cannot be interpreted so as to mean that the entire exempt income is to be disallowed. The window for disallowance was indicated in section 14A and was only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income".This proportion or portion of the exempt income surely cannot swallow the entire amount." As the suo motu disallowance made by the assessee is far more than the exempt income earned by it, so,in our opinion there was no justification for making any further disallowance. Reversing th....
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....ot considered by FAA while deciding the appeal,that the assessee was entitled to claim 50% of the additional depreciation i.e. 10% during the year under consideration.He relied upon the case of Rittal India Pvt. Ltd.-No.1(380 ITR 423). The DR supported the order of the FAA. 3.4. We have heard the rival submissions and perused the material before us.We find that the FAA had disallowed the claim made by the assessee u/s.32(1)(iia),that she was of the opinion that it was available for one year only i.e.in initial year,that the assessee had claimed 50% of the deduction as the machinery was used for a period less than 180 days in the last AY.,that it had claimed the balance deduction in the year under appeal.We find that in the case of Rittal India Pvt. Ltd. -No.1(supra) the Hon'ble Karnataka High Court has dealt the identical issue. Facts of the case were that the assessee was an existing industrial undertaking, when it had acquired and installed new plant and machinery in the FY.2006-07,that it had claimed 50% of additional 20% depreciation(i.e.,10% additional depreciation) u/s.32(1)(iia) of the Act in the corresponding AY.2007-08,that the new machinery was acquired after 01/10/....
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....s for the benefit of the assessee and with the purpose of encouraging industrialisation, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant and machinery, and putting it to use for the purpose of business. The proviso to clause (ii) of the said section makes it clear that only 50 per cent. of the 20 per cent.would be allowable, if the new plant and machinery so acquired is put to use for less than 180 days in a financial year. However, it nowhere restricts that the balance per cent.would not be allowed to be claimed by the assessee in the next AY.. 9. The language used in clause (iia) of the said section clearly provides that "a further sum equal to 20 per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is per cent. additional depreciation. By virtue of the proviso referred to above, only per cent.can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent. additional d....