2017 (3) TMI 1328

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....at the provision of Rule 8D does not make any such distinction? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 12,32,814/- being prior period expenses ignoring the fact that the bill was raised on 28.3.2007 pertaining to FY 2006-07? 4. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 5. That the grounds of appeal are without prejudice to each other. 6. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing. 3. The brief facts of the case are that the assessee is engaged in the business of manufacturing of engineering plastic and fish net twines. The assessee filed its return of income showing loss of Rs. 29,59,46,143/- on 29.09.2008. The return was revised on 31.3.2010 by claiming prior period expenditure amounting to Rs. 51,81,578/- and loss was declared at Rs. 30,24,23,126/-. The revised return was processed u/s. 143(1) of the I.T. Act. The case was selected for scrutiny and the AO completed the assessment u/s. 143(3) of the I.T. Act, by making a disallowance of Rs. 5,35,65,500/- u/s. 14A of t....

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....llant has vehemently argued that since the quantum of investments remained unchanged at 7,86,9.10 lac since A Y 2005-06 to 2009-10, the proportionate interest expenses have again been offered as disallowance U/S 14A of the Act, treating the same as direct expenditure relating to earning of exempt income. Therefore, the appellant has disallowed Rs. 71,86,533/- (being average interest @ 8.39% on Rs. 857.04 lacs) under Rule 8D(2)(i) of IT Rules. further, the AO's action in respect of a1lowance under Rule 8D(2)(iii) amounting to Rs. 39,34,548/- has also not been disputed by the appellant in its computation being expenditure component relating to administration and managerial expenditure attributable to earning of exempt income. However, the appellant has objected the disallowance under Rule 8D(2)(ii) of the IT Rules, since it has already been accepted by the AO that before 31st March, 2005, an amount of Rs. 875.04 lac has been utilized for investment and remaining loan was for business purposes. Since then no new investment in shares has been made by the appellant and various loans obtained by the appellant have been utilized for specific purpose of business working capital require....

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.... reflected on the face of the invoice itself. The AO has not given any reason to disbelieve the invoice after acknowledging the same. From the documents, it is clear that the raw material was received during the current year, even if it was bought on 28.03.2007. As the liability got crystallized during the current year, such expenses are very much allowable as held by various courts, relied upon by the appellant in its submissions. Regarding the remaining expenses of prior period viz. Godown Rent, Repair and Maintenance and Freight on Sales, no documentary evidences in support of the claim that the liability got crystallized during the current year have been filed by the appellant and therefore, the AO was justified in disallowing the same. In the result, the appellant gets a relief of Rs. 12,32,814/- out of total addition of Rs. 51,81,578/-. The grounds of appeal are partly allowed. In the result, the appeal of the appellant is partly allowed." 8.1 On perusing the above finding of the ld. CIT(A), with regard to ground no. 1 & 2, we note that this issue relates to against the addition on account of disallowance of Rs. 5,35,65,500/- made by the AO u/s 14A of the Act after appl....

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....he assessee's argument have force and it is undisputed that the AO had determined in AY.2006-07, the loan amount of 857.04 lac utilized for investment in shares out of total borrowings of Rs. 4612.12 lac and same has been followed in AY 2007-08 as the quantum of investment in shares remained unchanged. The facts being the same during the year under consideration and the amount of disallowance has already been disallowed by the appellant under Rule 8D(2)(i) of IT Rules as directly attributable expenditure; there remains no justification for making further disallowance under Rule 8D(2)((ii) of IT Rules. Thus, total disallowance uls 14A of the Act comes at Rs. 1,11,21,08l/-. Thus, out of total addition on account of disallowance of Rs. 5,35,65,500/- made by the AO uls 14A of the Act, an amount of Rs. 92,88,538/- (Rs. 1,11,21,08l - 18,32,543) only was rightly sustained and the assessee gets the consequential relief, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the ground nos. 1 & 2 raised by the Revenue. 8.2 With regard to ground no. 3, we find that as against the disallowance of Rs. ....