TaxTMI 
TaxTMI 
2018 (5) TMI 141
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.... are dismissed as not pressed. 3. We now deal with the 1st & 2nd grounds of appeal of III which read as under: 1. The Learned CIT (A) erred in confirming disallowance of Rs. 26,20,720/-being 0.5% of average investment of Rs. 52,41,43,990/- without appreciating the fact That it has been held in the case of M/s Magna Publishing Co. Ltd. vs. ITO in ITA No. 5536/Mum/2014 and also in the case of ACIT vs. Punjab state Coop & Marketing Fed Ltd in ITA Nos. 548/Chd/2011 that no disallowances under section 14A of the Act can be made where no exempt income is earned. 2. Without prejudice to above, the Learned CIT (A) failed to consider that appellant on its own disallowed Rs. 40,000/- under section 14 A of the Act. 4. Briefly stated, the facts of the case are that the assessee has not earned any exempt income during the year under consideration. The Assessing Officer (AO) observed that even if no exempt income is actually earned or received during the year in any form whatsoever, the provisions of section 14A shall apply, where any such investment is made wherefrom such type of income might be generated either in the past or in the future year(s). In this regard, the AO placed reliance ....
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....otion Expenses, Gift Expenses, Diwali Pooja Expenses and Chandla Expenses. 4. The Learned CIT (A) has erred in abruptly allowing only part relief to the aforesaid expenses without appreciating the fact that the same were incurred for the purpose of appellant's business only. More so, major expenses were allowed by the Hon'ble ITAT in earlier years on the basis of the same set of facts. 5. The Learned CIT(A) erred in confirming disallowance of a sum of Rs. 12,44,930/-being 41.55% of Rs. 29,96,221/- disallowed by the assessing officer under the head business promotion expenses of Rs. 5,25,000/-, gift expenses of Rs. 19,00,000/-, Diwali Pooja Expenses of Rs. 2,70,000/- and Chandla Expenses of Rs. 3,01,221/- (totaling to Rs. 29,96,221/-) on an ad hoc basis by alleging that the same were not incurred wholly and exclusively for the business. 6. The Learned CIT (A) ought to have appreciated that the Diwali Pooja Expenses incurred by the Appellant firm were recognized custom in the trade and they can be regarded as necessary expenses for the purposes of the Appellant's business activities. 7. The Learned CIT (A) ought to have appreciated that the Appellant firm incu....
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..... In appeal, the Ld. CIT(A) noted that similar disallowances out of business promotion, gift expenses, Diwali Pooja expenses and Chandla expenses were made and part relief was allowed by the CIT(A), having considered such expenses for AYs 2007-08, 2008-09 and 2009-10. The Ld. CIT(A) also observed that in AYs 2007-08, 2008-09 and 2009-10, the ITAT has restricted the disallowance to 50% of the disallowance sustained by the CIT(A). The Ld. CIT(A) thus held at para 9.4: "9.4.1 I have considered the submissions of the appellant and perused the materials available on record. The appellant has requested to delete the disallowances of Rs. 5,25,000/- out of Business promotion expenses, Rs. 19,00,000/- out of Gift expenses, Rs. 2,70,000/- out of Diwali Pooja Expenses and Rs. 3,01,221/- out of Chandla Expenses, aggregating to Rs. 29,96,221/-. The main contention of the appellant is that the Ld. AO has erred in making ad-hoc disallowance, as the same is not permitted as per provisions of the Act. It has also been argued that these expenses were incurred for the business purposes and hence allowable u/s 37 of the Act. The appellant has also submitted that similar disallowances were made in it....
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....similar as that of A.Ys. 2007-08, 2008-09 and 2009-10. In A.Y. 2007-08 out of total disallowance of Rs. 15,71,972/-, out Business promotion expenses. Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of Rs. 6,35,986/-, i.e. confirmed 40.45% of disallowances. Similarly, in A.Ys. 2008-09 out of total disallowance of Rs. 17,41,127/-, out Business promotion expenses, Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of Rs. 7,20,564/-, i.e. confirmed 41.39% of disallowances. In A.Y. 2009-10 out of total disallowance of Rs. 20,88,927/-, out Business promotion expenses, Gift expenses, Diwali Pooja expenses and Chandla expenses, the Hon'ble ITAT has finally confirmed the disallowance of Rs. 8,94,464/-, i.e. confirmed 42.82% of disallowances. Hence, in A.Ys. 2007-08, 2008-09 and 2009-10, the average percentage of disallowance confirmed by the Hon'ble ITAT works out to be 41.55%. Respectfully fallowing the decisions of the Hon'ble ITAT in appellant's own case for A.Ys. 2007-08, 2008-09 and 2009-10, the disallowances made by the Ld. AO out of Bu....
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....on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 14A of the Income Tax Act, 1961 ignoring the fact that the provisions of Section 14A apply even if no exempt income is actually earned or received during the year in any form whatsoever. 16. As mentioned at para 4 hereinbefore, the assessee has not earned any exempt income during the year under consideration. Therefore, our decision at para 7 is equally applicable while deciding the above two grounds of appeal. Accordingly, the above two grounds of appeal filed by the Revenue are dismissed. 17. The 3rd ground of appeal reads ad under: Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in holding that only a part of the expenditure prohibited by law can be disallowed u/s 37(1) of the Income Tax Act, 1961 contrary to the fact that the entire expenditure ought to be disallowed in terms of Section 37(1), as the payment is admittedly in the nature of "speed money" paid in cash and illegal as per law as also against the public policy. 18. During the course of assessment proceedings, the AO noticed that the assessee collects certain....
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....es were made to various government agencies, and the assessee failed to prove that these are in the nature of business expenses. The AO observed that there is no provision under the Act to partially allow any expenditure incurred by the assessee. Referring to section 37(1), the AO held that the expenditure incurred by the assessee should be wholly and exclusively for the purpose of business and should not be for the purpose which is an offence prohibited by law. The assessee has disallowed in its return of income an amount of Rs. 82,27,656/- (being 25% of Rs. 3,29,10,623/-). Therefore, the AO made a disallowance of the balance amount of Rs. 2,46,82,967/-. 19. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) observed that for the AYs 2004-05, 2005-06 and 2006-07, similar disallowance was made by the AO and the CIT(A) following the order of the Tribunal in assessee's own case directed the AO to restrict the disallowance to 25%. Against the said order of the CIT(A), the Revenue filed an appeal before the ITAT, Mumbai in ITA No. 8190, 8191 and 8192/Mum/2011 and the Tribunal vide its order dated 27.11.2011 dismissed the appeals. The L....