TaxTMI 
TaxTMI 
2015 (9) TMI 1664
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....ee company is engaged in the business of trading and export of cut and polished diamonds. The AO noted that assessee has shown investment to the tune of Rs. 41,12,41,033/- in the Balance sheet which stood at Rs. 70,23,56,174/- in the earlier AY 2008-09. In response to the show cause notice by the AO as to why the provisions of section 14A r.w. Rule 8D should not be invoked, the assessee stated and submitted as under :- "The company was a partner in C Mahendra Infojewels since 2005, the company had invested capital out of interest free funds received from Directors to whom no interest has been in any of the years. No expenses were incurred by the company to make such investment and most of the amount represents accumulated profit in the f....
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....subsidiary Company namely Ciemme Jewels Ltd and in a partnership firm C. Mahendra InfoJewells of Rs. 39,11,15,141/- in which the assessee is a partner. Both the investments being strategic investments, therefore no disallowance u/s 14A can be made. In support of his contention, he relied upon the decision of ITAT Mumbai Bench in the case of J M Financial Ltd in ITA No. 4521/Mum/2012 and Garware Wall Ropes Ltd. in ITA No. 5408/Mum/2012 & Others was that the investment in the partnership firm was mostly on account of accretion of profit in several years and hence no disallowance u/s 14A can be made on such investments. He pointed out that from financial year 2004-05 to 2008-09, share profit of the partners aggregated at Rs. 23,50,30,245/- and....
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....een debited to capital account of the assessee. This accreted profit is to the extent of Rs. 23,50,30,245/-. Such an accretion of profit in the capital account cannot be reckoned as amount invested for the purpose of earning exempt income as assessee could not have been said to have incurred any kind of an expenditure for taking a decision for making the investment or investment has been made from the coffers of interest bearing funds. Secondly, from the perusal of the administrative expenses aggregating to Rs. 27,87,167/- the details of which are as under :- SCHEDULE 'N' ADMINISTRATIVE EXPENSES Bank Charges & Commission 4,19,825 Clearing and forwarding charges 15,133 Conveyance & Travelling 6,296 Electricity Charges 74,357 E....