TaxTMI 
TaxTMI 
2017 (2) TMI 738
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....grounds of appeal :- 1.00 On the facts and circumstances of your appellant's case as well as in law, the Id. CIT(A) erred in confirming disallowance of Rs. 5,76,925/- under section 14A of the Act without proving any nexus between the expenditure incurred and exempt income earned. 1.01 The Id. CIT (A) further erred in confirming disallowance on account of Portfolio Management Charges amounting to Rs. 4,79,6117-, forming part of total disallowance of Rs. 5,76,9257-, without appreciating the facts that your appellant has already disallowed such Portfolio Management Charges in the computation of total income. 1.02 Your appellant prays before your honour to hold so now and delete the impugned disallowance. 2.00 Your appellant cra....
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....of the Accountant the assessee should not suffer and we, therefore, condone the delay and proceed to adjudicate the appeal. 4. Briefly stated facts of the case are that the assessee is a private limited company engaged in the business of manufacturing industrial fragrance, flavours and perfumes. Return of income was filed on 30.10.2007 showing total income at Rs. 1,93,98,830/- and value of fringe benefits at Rs. 2,75,925/-. Case was selected for scrutiny assessment. Notices u/s 143(2) of the Act followed by notice u/s 142(1) of the Act were issued. Necessary details including audited financial statement were provided. During the course of assessment proceedings ld. Assessing Officer while examining the provisions of section 14A of the Ac....
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....lso require time and effort besides paper work on part of employees. Attribution of part of employee costs towards investment activities is therefore justified. Once incurring of expenditure towards managerial and administrative purposes for earning of investment income cannot be ruled out, it is a case falling under sub-section (2) of section 14A, i.e. appellant's claim that no expenditure was incurred for earning tax free income is incorrect. But at the same time it is also correct that the expenditure attributable to earning of tax free income is then to be determined in a reasonable manner and not as per Rule 8D for AY 2007-08, as per decision by Mumbai High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. 4.3.1 As rega....
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....and dividend from investments which are being re-invested in tax free securities. The appellant is also having separate cash credit account for manufacturing purposes. Hence, the disallowance of interest paid in proportion to ratio of investment in tax free securities to total assets is not reasonable. The total disallowance made by the AO is Rs. 5,76,925/-. Thus the disallowance made over and above PMS charges is Rs. 97,314/-. This amount can be held to be a reasonable amount for making disallowance out of the interest paid as also administrative expenses incurred by the appellant for making investment through its own office. 4.3.4 Hence, the disallowance made by the AO of Rs. 5,76,925/- is upheld on the basis of these discussions and t....
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....@ 33 of P/B). Thus, interest free funds at appellant's disposal are almost 4.03 times the amount of investments. In such a scenario, no disallowance is called for u/s 14A in respect of interest. Reliance is placed on: > CIT vs. Torrent Power Ltd. - 363 ITR 474 (Guj.) > CIT vs. Suzlon Energy Ltd. - 354 ITR 630 (Guj) > CIT vs. Gujarat Power Corporation Ltd. - 352 ITR 583 (Guj) > CIT vs. Hitachi Home & Life Solutions (I). Ltd. - (2014) 41 taxmann.com 540 (Guj) > CIT vs. Reliance Utilities & Power Ltd. - 313 ITR 340 (Bom) > Munjal Sales Corporation vs. CIT - 298 ITR 298 (SC) Accordingly, impugned disallowance deserves to be deleted in toto. 7. On the other ld. Departmental Representative (DR) vehemently argued suppor....
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.... 14A of the Act since corresponding income has already been offered to tax. This fact that Rs. 4,79,611/- has been disallowed while calculating the business income has not been disputed by the Revenue and, therefore, this amount of Rs. 4,79,611/- stands to be reduced from the gross disallowance of Rs. 5,76,925/-. 10. As regards balance disallowance of Rs. 97,314/- i.e. (Rs.5,76,925 - Rs. 4,79,611) we find that assessee's investment as on 31.03.2007 stands at Rs. 9.52 crores whereas interest free funds which included share capital and reserves stood at Rs. 38.42 crores as on 31.3.2007 which means that assessee's interest free funds is almost 4 times the investment made. Hon. Jurisdictional High Court in the case of CIT vs. Torrent Power L....