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2015 (11) TMI 1823 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Need for recording of satisfaction before making addition - HELD THAT - It is incumbent upon the Assessing Officer first to be satisfied that the claim made by the assessee as to whether any expenditure has been incurred or not, in relation to the income which does not form part of the total income under the Act, is correct. The perusal of the assessment order in the case of assessee, very clearly reflects that the Assessing Officer vide para 3.1 had noted the fact that the assessee had declared the exempt income, but had not debited any expenses in the books of account against the said exempted income. In view thereof, the assessee was requested to explain the reasons for the same and as to why the provisions of section 14A of the Act read with Rule 8D of the Rules should not be invoked. In view of the same, we find no merit in the plea of the assessee in this regard. The satisfaction is deemed to have been recorded and we proceed to decide the issue on merits. Whether any disallowance is warranted out of dividend income received on account of dividend on mutual funds? - In view of the binding preceding being available in assessee s own case with regard to the investments, which admittedly were not made in the instant assessment year, but were brought forward from the earlier years, then disallowance if any worked out in the preceding year is to be applied for the year under consideration also since the funds have been deployed in the earlier years and not in the current year. Accordingly, we direct the Assessing Officer to compute the disallowance, if any, in the hands of the assessee in line with working of the disallowance under section 14A(2) of the Act read with Rule 8D(ii) of the Rules in the preceding year. Further, no bifurcation of investments and stock in trade was raised in earlier year, hence this plea is dismissed as investments are old. Disallowance under section 14A of the Act i.e. the administrative expenses relatable to earning of exempt income - From the details, it is not clear that as to whether any disallowance was made under Rule 8D(iii) of the Rules in the hands of assessee in the preceding year. In view thereof, in case no such disallowance is made in the hands of assessee in the earlier years, then we hold that no disallowance was warranted in the year under consideration. However, in case the assessee has accepted the disallowance made under Rule 8D(iii) of the Rules in the preceding year, then the facts of the case being identical, we find no merit in the claim of the assessee in this regard. The Assessing Officer shall verify this aspect from the assessment records for assessment year 2008-09 and decide the issue accordingly. AO shall afford reasonable opportunity of hearing to the assessee while deciding the issue of disallowance under section 14A of the Act. Disallowance of foreign travel expenses - Assessing Officer noted that the explanation given by the assessee was without any specific details, or supported by any evidence, even the details of various destinations travelled by her were not furnished and in the absence of any evidence that foreign travel expenses were incurred for the business, the expenditure claimed by the assessee was disallowed - HELD THAT - The assessee is making this plea from assessment year 2006-07 onwards, but till the instant assessment year i.e. 2009-10, no such investment has been made by the assessee. The statement by the assessee is without support of any iota of evidence and hence, cannot be accepted. Even during the course of hearing, the assessee was asked to produce evidence of business meetings undertaking by the assessee or the proposed investors met by the director of the assessee company on her foreign visit. The learned Authorized Representative for the assessee admitted that no such details were available. In the above said facts and circumstances, we find no merit in the claim of the assessee whatsoever. However, following the earlier order of the Tribunal, we restrict the disallowance to 75% of expenditure and direct the Assessing Officer to allow 25% of expenditure. The ground of appeal raised by the assessee is thus, partly allowed. Computation of profits of the windmill power generation unit - HELD THAT - In the case of the assessee, the matter in assessment year 2008-09 travelled to the Tribunal and the Tribunal upheld the order of Assessing Officer in computing disallowance by allocating the indirect expenses on the basis of turnover of respective businesses. The Tribunal upheld the order of lower authorities. However, directions were given to the Assessing Officer to re-calculate the computation of disallowance on the basis of working that may be furnished by the assessee. The said directions were given by the CIT(A) and were upheld by the Tribunal. Following the same parity of reasoning, we uphold the order of CIT(A) in this regard. However, in line with earlier directions, we direct the Assessing Officer to recompute the disallowance in line with directions of the Tribunal in assessment year 2008-09. The ground of appeal raised by the assessee are decided as indicated above. Deduction u/s 80IA(4) on account of profit earned from the business of windmill power business - HELD THAT - The Tribunal had allowed the claim of the assessee by following the earlier decision of Pune Bench of Tribunal in Serum International Ltd. 2013 (1) TMI 688 - ITAT PUNE wherein the issue had been decided following the ratio laid down by the Hon ble Madras High Court in Velayudhaswamy Spinning Mills (P) Ltd. 2010 (3) TMI 860 - MADRAS HIGH COURT - Before us also, no other contrary decision has been brought to our notice, therefore, in the above said background and in view of the identical issue having been decided in assessee s own case for assessment years 2006-07 2012 (2) TMI 604 - ITAT PUNE and 2008-09 2013 (12) TMI 1708 - ITAT PUNE we find no merit in the grounds of appeal raised by the Revenue and the same are dismissed. Disallowance u/s 14A - HELD THAT - We remit this issue also back to the file of Assessing Officer to determine the source of funds in the hands of assessee in line with the ratio laid down by the Tribunal in Lap Finance Consultancy Pvt. Ltd. 2013 (12) TMI 1708 - ITAT PUNE in assessment year 2008-09. The matter is remitted back to the file of Assessing Officer with same directions as above.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Disallowance of foreign travel expenses. 3. Apportionment of indirect expenses against the profits of windmill business. 4. Deduction under Section 80IA(4) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee was engaged in finance and investments, power generation, and supply of power. The Assessing Officer (AO) disallowed Rs. 18,83,404/- under Section 14A read with Rule 8D, noting that the assessee had not debited any expenses against exempt income. The AO found that the investments in exempt assets were made using borrowed funds. The CIT(A) upheld the AO's decision, rejecting the assessee's claim that investments were made from own funds and that no administrative expenses were incurred for earning tax-free income. The Tribunal noted that the assessee had both interest-free and borrowed funds, and the presumption was that investments were made from own funds. The Tribunal remanded the issue back to the AO to determine if the interest expenditure was related to the funds used for exempt income investments, following the precedent set in the assessee's own case for the previous year. 2. Disallowance of Foreign Travel Expenses: The AO disallowed Rs. 10,09,253/- claimed as foreign travel expenses, as the assessee failed to provide specific details or evidence of business purposes served by the travel. The CIT(A) upheld the disallowance, noting that similar expenses were disallowed in previous years and that the assessee failed to prove the business nexus of the expenses. The Tribunal, following its earlier decisions, allowed 25% of the expenses, disallowing the remaining 75%, as the assessee did not provide evidence of business meetings or outcomes of the foreign trips. 3. Apportionment of Indirect Expenses against the Profits of Windmill Business: The assessee did not consider indirect expenses while computing income from windmill business. The AO allocated indirect expenses such as remuneration to directors, salaries, and legal fees based on the turnover of respective businesses. The CIT(A) and the Tribunal upheld this allocation, directing the AO to recompute the disallowance based on the working provided by the assessee, consistent with the Tribunal's decision in the previous year. 4. Deduction under Section 80IA(4) of the Income Tax Act: The AO denied the deduction of Rs. 8,75,979/- claimed under Section 80IA(4) for profits from windmill business, applying Section 80IA(5) to recompute the income/loss from the initial assessment year. The CIT(A) allowed the deduction, following the Tribunal's decision in the assessee's case for earlier years. The Tribunal upheld the CIT(A)'s decision, noting that the issue had been consistently decided in favor of the assessee in previous years and no contrary decision was presented. Conclusion: The Tribunal remanded the issue of disallowance under Section 14A back to the AO for verification, allowed partial foreign travel expenses, upheld the apportionment of indirect expenses against windmill profits, and confirmed the deduction under Section 80IA(4). The appeals of the Revenue were dismissed, and the assessee's appeals were decided as indicated above.
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