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2017 (1) TMI 861 - AT - Income TaxDisallowance u/s 14A - Held that - While adjudicating the appeal for the AY.2009-10,the Tribunal had restricted the disallowance to 1% of the dividend income.Following the same,we hold that disallowance should be restricted to 1% of the exempt income.First ground of appeal is decided in favour of the assessee,in part. Disallowance of expenditure on account of repairs and maintenance - Held that - During the course of hearing before us,the AR admitted that the assessee had not supplied the required information to the AO/FAA about the repairing.In our opinion,it is the duty of the assessees to produce evidence in their support if they claim that any expenditure was incurred for carrying out business. In the case under consideration,the assessee has failed to prove the genuineness of the expenditure incurred by it during the year under consideration. Therefore,we are of the opinion that order of the FAA does not suffer from any legal infirmity.
Issues:
1. Disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962. 2. Disallowance made by the Assessing Officer under Rule 8D(iii) of the Rules. 3. Disallowance of expenditure on repairs and maintenance. Issue 1: Disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962: The Assessing Officer (AO) disallowed ?82.08 lakhs under section 14A read with Rule 8D of the Income Tax Rules, 1962, as the assessee had earned mutual fund dividends and interest income from other sources, claiming the income from mutual funds as exempt without disallowing any expenditure attributable to the exempt income. The First Appellate Authority (FAA) directed the AO to delete the disallowance on interest expenditure as no borrowed funds were utilized for earning exempt income. However, the disallowance under Rule 8D(iii) of the Rules was upheld. The ITAT Mumbai held that Rule 8D cannot be invoked without proper satisfaction by the AO, modifying the orders of the AO and FAA to disallow one percent of the dividend income as per section 14A. The appeal was partly allowed. Issue 2: Disallowance made by the Assessing Officer under Rule 8D(iii) of the Rules: The ITAT Mumbai restricted the disallowance to 1% of the exempt income, following the Tribunal's decision for the AY 2009-10. The first ground of appeal was decided in favor of the assessee in part. The second ground of appeal, concerning a disallowance of ?7.78 lakhs for repairs and maintenance, was upheld by the FAA and confirmed by the ITAT Mumbai. The assessee failed to provide confirmation from parties or current addresses of individuals carrying out the repairs, resulting in the dismissal of the appeal filed by the AO and partial allowance of the assessee's appeal. Issue 3: Disallowance of expenditure on repairs and maintenance: The Assessing Officer made an addition of ?7.78 lakhs to the income of the assessee due to lack of details and proof regarding the expenditure on repairs and maintenance. The FAA upheld this addition, noting discrepancies in the information provided by the assessee. The ITAT Mumbai confirmed the decision, emphasizing the duty of the assessee to provide evidence to support claimed expenditures. The ground concerning the disallowance of repairs and maintenance expenses was decided against the assessee. In conclusion, the ITAT Mumbai partially allowed the assessee's appeal while dismissing the appeal filed by the Assessing Officer, addressing the disallowances under section 14A and Rule 8D, and confirming the disallowance of expenditure on repairs and maintenance.
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