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2015 (4) TMI 437 - AT - Income TaxDisallowance of weight shortage expenses - Held that - We find that the AO as well as the Id.CIT(A) has disallowed the expenditure on the basis that in earlier year the assessee has not claimed such kind of expenditure. In our considered view, since the assessee has placed on record the debit notes raised by various parties to whom the material was supplied, therefore the authorities below were not justified in disallowing the expenses claimed by the assessee. We therefore direct the AO to delete this addition. Before us, Revenue has not brought on record any material to demonstrate as to how the decision of Hon ble Tribunal for A.Y. 07-08 in Assessee s own case would not be applicable to the facts of the case for the year under appeal more so when ld. CIT(A) himself has noted that identical issue arose in A.Y. 07-08 and had followed the order of his predecessor. - Decided in favour of assessee. Disallowance u/s 14A r.w. rule 8D - Held that - Considering the totality of the facts and in view of the fact that the provisions of Rule 8D are applicable for the year under consideration and in the light of the decision of Joint Investments Pvt Ltd Versus CIT 2015 (3) TMI 155 - DELHI HIGH COURT and in view of the fact that the disallowance worked out by A.O u/s. 14A is more than the exempt income and considering the alternate submission of ld. A.R. to make a reasonable disallowance u/s. 14A as deemed fit, we are of the view that disallowance of ₹ 5,000/- if made in the present case will meet the ends of justice. - Decided partly in favour of assessee.
Issues Involved:
1. Disallowance of Rs. 3,42,128/- as weight shortage expenses. 2. Disallowance of Rs. 1,02,007/- under section 14A read with Rule 8D. Issue-wise Detailed Analysis: 1. Disallowance of Rs. 3,42,128/- as Weight Shortage Expenses: - Facts and Proceedings: The Assessee, engaged in trading of Ready Cotton Bales and Investment, claimed weight shortage expenses of Rs. 3,42,128/- for A.Y. 2008-09. The A.O disallowed the claim due to lack of evidence and the fact that such expenses were not claimed in previous years. The CIT(A) upheld the disallowance by following his predecessor's decision for A.Y. 2007-08, where similar claims were disallowed due to insufficient evidence and the abnormal nature of the claim. - Tribunal's Analysis: The Assessee argued that the identical issue for A.Y. 2007-08 was decided in their favor by the ITAT, where it was held that the authorities below were not justified in disallowing the expenses as the Assessee had provided debit notes and correspondences with the parties as evidence. The Tribunal found no new material from the Revenue to contradict this precedent. - Judgment: The Tribunal allowed the Assessee's appeal, directing the deletion of the disallowance of Rs. 3,42,128/- for weight shortage expenses, following the earlier Tribunal decision for A.Y. 2007-08. 2. Disallowance of Rs. 1,02,007/- under Section 14A read with Rule 8D: - Facts and Proceedings: The Assessee declared dividend income of Rs. 20,498/- as exempt and had investments of Rs. 11.13 lacs. The A.O. noted that the Assessee had taken loans of Rs. 3.07 crore and paid interest of Rs. 5.48 lacs. The A.O. disallowed Rs. 1,02,007/- under section 14A read with Rule 8D, as the Assessee could not prove that interest-bearing funds were not used for investments. The CIT(A) upheld this disallowance, following the predecessor's order for A.Y. 2007-08. - Tribunal's Analysis: The Assessee contended that no new investments were made during the year and that investments were from free reserves. The Tribunal noted that the Assessee's interest-free funds exceeded the investments and that the disallowance under section 14A exceeded the exempt income. The Tribunal referenced the Delhi High Court decision in Joint Investment Pvt. Ltd. vs. CIT, which held that disallowance under section 14A cannot exceed the exempt income. - Judgment: The Tribunal, considering the facts and the legal precedent, directed a reasonable disallowance of Rs. 5,000/- under section 14A, instead of the Rs. 1,02,007/- disallowed by the A.O. Conclusion: The appeal was partly allowed, with the Tribunal directing the deletion of the disallowance of Rs. 3,42,128/- for weight shortage expenses and reducing the disallowance under section 14A to Rs. 5,000/-. The order was pronounced in Open Court on 27-03-2015.
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