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2016 (2) TMI 376 - AT - Income TaxDisallowance u/s 14A - excluding interest on bank loan and term loans for the purpose of computing disallowance - Held that - As relying on Champion Commercial Co Ltd case 2012 (10) TMI 24 - ITAT, KOLKATA we uphold the order of the Commissioner of Income Tax (Appeals) in excluding the interest on bank loan and term loans for the purpose of computing disallowance under Rule 8D(2)(ii). - Decided in favour of assessee Disallowance of foreign travel expenses - Held that - on surmises and presumption, adhoc disallowance is not possible. However, we make it clear that there cannot be double claim of same expenditure, one in the hands of the assessee and another in the hands of the sister concern for the same assessment year, viz. 2012-13. Accordingly, this ground of appeal of the Revenue is also dismissed. - Decided in favour of assessee Disallowance invoking the provisions of sec.43B - employees contribution towards PF & ESI not paid within due date under the respective Act - Held that - In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income, thus no disallowance required - Decided in favour of assessee
Issues Involved:
1. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules. 2. Disallowance of foreign travel expenses. 3. Disallowance under Section 43B regarding contributions to employees' PF & ESI. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules: The primary issue pertains to the disallowance of expenses under Section 14A read with Rule 8D of the Income Tax Rules for the assessment years 2011-12 and 2012-13. The assessee had invested significant amounts in shares/mutual funds, and the Assessing Officer (AO) invoked these provisions to disallow Rs. 63,78,704 and Rs. 42,69,311 for the respective years. The Commissioner of Income-tax (Appeals) confirmed the application of Section 14A read with Rule 8D but observed that the interest paid on loans for business purposes should not be considered for disallowance. He thus reduced the disallowance to Rs. 8,93,146 and Rs. 10,43,008 for the respective years. The Tribunal upheld the Commissioner's decision, noting that the financial statements were part of the return of income and available to the AO. It referenced the case of ACIT v. M/s. Best & Crompton Engineering Ltd., emphasizing that interest on borrowings used for business purposes should be excluded from the disallowance calculation. 2. Disallowance of Foreign Travel Expenses: The AO disallowed 25% of the foreign currency purchases used by the Director during foreign travel, amounting to Rs. 2,61,898, on the presumption of personal expenses. The Commissioner of Income-tax (Appeals) deleted this disallowance, and the Tribunal upheld this decision. The Tribunal found the disallowance to be adhoc and based on surmise without concrete evidence of personal benefit. It referenced a similar case involving the assessee's sister concern, where the Tribunal had ruled in favor of the assessee, noting that the expenses were reasonable and no portion of the foreign currency was surrendered. 3. Disallowance under Section 43B regarding Contributions to Employees' PF & ESI: The AO disallowed Rs. 2,29,048 under Section 43B for delayed payment of employees' PF & ESI contributions. The Commissioner of Income-tax (Appeals) allowed the claim, noting that the payments were made within the due date for filing the return under Section 139(1). The Tribunal upheld this decision, referencing the Jurisdictional High Court's ruling in CIT v. M/s. Industrial Security & Intelligence India Pvt. Ltd., which held that contributions made before the due date for filing the return should not be disallowed. Conclusion: The Tribunal dismissed the Revenue's appeals, confirming the Commissioner of Income-tax (Appeals)'s decisions on all issues. The Tribunal emphasized adherence to existing legal precedents and the necessity of concrete evidence for disallowances. The order was pronounced on January 8, 2016, in Chennai.
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