TaxTMI 
TaxTMI 
2026 (6) TMI 369
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....es u/s. 14A of the Act-Rs.27,75,315/- 1.1. The Assistant Commissioner of Income-tax, Circle 3(2)(1), Mumbai (AO) erred in disallowing expenses of Rs. 27,75,315/- u/s. 14A as against Rs. 1,20,899/- disallowed by the appellant company in the Return of Income. 1.2. The Commissioner of Income-tax, (Appeals)-48, Mumbai [CIT (A)] erred in setting aside the matter to the file of the AO for computing the disallowance of expenses after taking income from growth funds. The appellant submits that investments made by the appellant in growth mutual funds are not capable of earning exempt income as dividend is not paid by the fund to the unit holders. 1.3. The AO erred in considering interest expenses of Rs. 1,65,37,000/- for the purpose of disallowance u/s 14A of the Act r.w.r 8D(ii) and 8D(iii) of the Rules. The appellant submits that the said expenses are incurred on facilities availed from banks for working capital requirements and not for the purpose of investments. The appellant submits that the investments have been made by the appellant out of its own funds and not out of borrowed funds. The CIT(A) erred in holding that the appellant has not submitted any suppo....
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....efore Tribunal. 3. We have heard the submissions of Dr Shivaram learned Senior Advocate assisted by Sh Rahul Hakkani Advocate, hereinafter referred as learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue. Ground No. 1 relates to disallowance under section 14A. The ld. AR of the assessee submits that during relevant financial years, the assessee earned exempt dividend income of Rs. 23,04,695/-. The assessee computed suo moto disallowance under section 14A r.w. Rule 8D of Rs. 1,20,899/-. The details of dividend income, computation of total income and working of suo moto disallowance was furnished before Assessing Officer (AO) and copy thereof is filed before Tribunal. The AO disregarded suo moto disallowances and computed disallowance by invoking Rule 8D and worked out disallowance of Rs. 28,96,214/-. The AO while computing disallowance considered all investments instead of restricting to those investments which yielded exempt income. Before ld. CIT(A), the assessee demonstrated that so far as interest expenses is concerned, such interest expenses were incurred for the purpose of business and not....
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....rked out disallowance of Rs. 28,96,214/- which consists of interest disallowance of Rs. 15,16,732/- and 0.5% of average value of investment. The AO allowed the benefit of suo moto disallowance and thereby worked out disallowance of Rs. 27,75,315/-. Before ld. CIT(A), the assessee submitted that growth mutual fund does not generate dividend. Such contention was not accepted by ld. CIT(A). On interest disallowance, the assessee submitted that interest free funds are far excess utilization of interest free funds. The ld. CIT(A) held that assessee has not demonstrated with supporting evidence about such plea. The assessee also took plea that disallowance under section 14A cannot exceed the exempt income. Such contention was also rejected by ld. CIT(A) that there are several contrary decisions. The ld. CIT(A) further noted that assessee claimed exempt income of Rs. 23,04,695/-, but not submitted details, if dividend income earned through growth funds were reinvested or not. The ld. CIT(A) directed the AO to recompute the disallowance on furnishing fresh figure by the assessee with regard to exempt income related to dividend on growth mutual fund. 6. Before us, the ld. AR of the asses....
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....ed for the purpose of business and rent was paid to related parties. The AO wrongly held that rent agreement was not furnished. The ld. CIT(A) confirmed the action of assessing officer. The ld. AR of the assessee submits that assessee is a company and there is no personal element on the expenses of a company. Rental expenses were incurred wholly and exclusively for the purpose of business of assessee. The AO has not brought any evidence on record that firm house was not used for the purpose of business. The rent is taxed in the hands of recipient and there is no tax evasion. Similar expenses were allowed in earlier year. To support his submission, the ld. AR of the assessee relied upon the decision of Sayaji Iron & Engg. Co. vs CIT (2002) 253 ITR 749 (752) Guj - HC). 8. On the other hand, ld. Sr. DR for the Revenue supported the order of lower authorities. The ld. Sr. DR for the submits that no agreement or other information about the leave and license was provided. The alleged rental property has no business connection. 9. At the time of hearing, we direct the assessee to furnish the name of the foreign guest, their nationality and purpose of visit and period of his stay. In....
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.... Thus, the assessee has claimed continuous expenses for six months. No doubt that expenditure incurred wholly and exclusively for the purpose of business is to be allowed. However, the assessee has to prove the business expediency and the purpose for which such expenditure was incurred. The ld. AR of the assessee explained before us that expenditure was incurred for stay of foreign customers. The name and details of foreign customers have not been furnished. From the details furnished, we find that only two foreign clients stated in the farm house for one or two days in entire period of six months. Thus, in order to avoid the possibility of revenue leakage, the disallowance is restricted to 50% of the rental expenses. The disallowance is also restricted to that extent keeping in view that the firm house is in the name of directors of the assessee company and personal use is not ruled out. In the result, this ground of appeal is partly allowed. 12. Ground no. 3 relates to disallowance under section 37(1)/35(1)(i). The ld. AR of the assessee submits that during the year, the assessee claimed deduction under section 35(2AB), bifurcation of which were furnished before lower authorit....
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.... coordinate bench of Delhi Tribunal in Auto Ignition Ltd. vs ADIT (supra) while considering the similar ground of appeal held that R&D expenditure though not eligible weighted deduction under section 35(2AB) but is allowable under section 37(1) to the extent of amount expenditure incurred by assessee. By following the decision of Delhi Tribunal, similar view was taken by Bangalore Tribunal in BEML Ltd. vs DCIT (supra). Thus, respectfully following the same, we direct the AO to allowed deduction of Rs. 22,00648/- under section 37(1). In the result, this ground of appeal is allowed. 16. In the result, appeal of the assessee is partly allowed. ITA 7161/M/2025 (A.Y. 2017-18 17. The assessee has raised following grounds of appeal: 1. Disallowance of expenses u/s. 14A of the Act-Rs.57,22,349/- 1.1. The Assistant Commissioner of Income-tax, Circle 3(2)(1), Mumbai (AO) erred in disallowing expenses of Rs. 57,22,349/- u/s. 14A as against Rs. Nil disallowed by the appellant company in the Return of Income. 1.2. The Commissioner of Income-tax, (Appeals) - 48, Mumbai [CIT (A)] erred in setting aside the matter to the file of the AO for computing the disallow....