TMI Blog2014 (2) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... business purpose. No material was brought on record to show that the consideration for services received by the assessee was so excessive as to warrant any disallowance out of the same. It is also observed that the amount of consideration paid was as per Memorandum of Understanding entered into by the assessee with the payee company. In view of the above facts and circumstances, we do not find any good reason to interfere with the order of the Ld. CIT(A) - Decided against revenue Disallowance u/s 36(1)(va) read with section 2(24)(x) being the employees’ contribution to Provident Fund not deposited within the stipulated time - Held that:- Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT ) held that with respect to the sum received by the assessee firm from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees’ account in the relevant fund or funds on or before the “due date” mentioned in explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a meagre disallowance of ₹ 1,00,000/- be made u/s 14A. He, therefore, by invoking provisions of section 14A alongwith rule 8D, made disallowance of interest expenditure of ₹ 1,37,027/- and administrative expenditure of ₹ 5,85,697/- and thereby a total disallowance of ₹ 6,42,822/-. 4. On appeal, the Ld. CIT(A) deleted the disallowance by observing as under: I have considered the assessment order, finding of A.O and the submission of the appellant. The appellant has earned dividend income of ₹ 73,84,448 and assessing officer by applying provisions of rule 8D r.w.s 14A has made disallowance of administrative and interest expenses whereas appellant has submitted that no such presumptive disallowance is called for more particularly when rule 8D cannot be applied in present case. The claim of appellant is supported by decision of Bombay High court in case of Godrej Boyce V/s DCIT INCOME TAX APPEAL NO.626 OF 2010 and finding of the Hon'ble court is as under: ...67. Even in the absence of sub sections (2) and (3) of Section 14A and of Rule 8D, the Assessing Officer was not precluded from making apportionment. Such an apportionment wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of tax free dividend income. Considering the decision of Hon'ble ITAT in appellant's own case for preceding assessment year, disallowance of interest expenditure for ₹ 57,125 is deleted and assessing officer is directed to restrict disallowance of administrative expenses u/s 14A @ 2% of dividend income. The related grounds of appeal are partly allowed. 5. The Ld. DR supported the order of the Assessing Officer whereas the Ld. AR supported the order of the Ld. CIT(A). 6. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the Assessing Officer made disallowance of ₹ 6,42,822/- by invoking provisions of section 14A as being relatable to exempt dividend income. 7. On appeal, the Ld. CIT(A) observing that the facts are identical to the facts of the Assessment Year 2005-06, by following the order of the Tribunal passed in the case of the assessee itself in Assessment Year 2005-06 has restricted the disallowance u/s 14A to 2% of the dividend income and deleted the balance amount of disallowance. 8. The Ld. DR could not point out any specific defect in the order of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing officer on presumption is not justified and it is deleted and related ground of appeal is allowed. 12. The Ld. DR objected against the above deletion by Ld. CIT(A) and supported the order of the Assessing Officer. The Ld. DR contended that the sister concern was incurring loss and therefore, the assessee paid excess amount to divert its taxable income. 13. We find that no specific mistake in the findings of the Ld. CIT(A) could be pointed out by the Ld. DR. We find that the genuineness of the payment is not in dispute. The Assessing Officer after observing about the loss incurred by the assessee company has brought no material on record after making investigation to show that the assessee has not received the services for which payments were made by the assessee. Rather, on the other hand, the allowance of deduction at the rate of 50% shows that the Assessing Officer also agreed that services of the staff of the payee company were utilized by the assessee company for its business purpose. No material was brought on record to show that the consideration for services received by the assessee was so excessive as to warrant any disallowance out of the same. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if section 43 would not be applicable to the appellant. (b) Decision of CIT v/s P. M. Electronics Ltd. 133 ITR 161 wherein Delhi High Court has held as under: Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 -Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 1998-99 - Whether deletion of second proviso to section 43B by way of amendment by Finance Act, 2003 is retrospective in nature - Held, yes - Whether amounts paid by employer towards provident fund contributions after due date prescribed under Employees' Provident Fund Act but before due date for furnishing of return of income are allowable in view of section 43B, read with section 36(1)(va) - Held, yes (c) Decision of Ahmedabad ITAT in case of Dynamic Industries Limited (A.Y. 2001-2002), in ITA No 1545/Ahd/2005 dated 23/01/2009 .....After careful consideration of the rival submissions, facts and circumstances of the case and the various decisions referred to by the assessee in its written submissions, we are of the opinion that though there are contrary decision of various High Courts, but in view of the proposition of law that i ..... 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