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TMI Blog2015 (6) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax Circle-8(1), Mumbai (hereinafter referred to as the 'AO') while passing the order dated October 25, 2010 under section 143(3) read with section 144C(13) pursuant to the directions of the Dispute Resolution Panel-II (hereinafter referred to as the DRP) dated September 16, 2010 erred in upholding the disallowance under section 14A of Rs. 66,90,080, with respect to dividend income exempt under section 10(34). (b) Without prejudice to the above, the Dispute Resolution Panel erred in directing the Assessing Officer to calculate the disallowance under section 14A as under : (i) Disallow all direct expenses relating to exempt income i.e., dividend of Rs. 3,20,06,486. (ii) Disallow proportionate interest expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,10,51,103. 4. The Assessing Officer erred in granting credit of Rs. 45,29,685 for tax deducted at source as against Rs. 45,41,317 claimed in the return of income (ROI), thereby granting short credit of Rs. 11,632. 5. The Assessing Officer erred in charging interest under section 234C of Rs. 6,01,401 as against Rs. 2,53,234 payable as per return of income (ROI). 6. The Assessing Officer erred in charging interest under section 234D of Rs. 12,61,817 as against Rs. 4,74,766 payable as per computation enclosed." Ground No. 1(a) : disallowance under section 14A 3. Ground No. 1(a) is relating to disallowance under section 14A of the Income-tax Act. During the assessment proceedings the Assessing Officer (hereinafter referred to as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very less or not in proportion to the investments made by the assessee for this purpose. Under such circumstances the different co-ordinate Benches of this Tribunal have observed that in such cases certain percentage of exempt income can constitute a reasonable estimate for making disallowance for the years earlier to assessment year 2008-09. The hon'ble Bombay High Court in the case of CIT v. Godrej Agrovet Ltd. (I. T. A. No. 934 of 2011) decided on January 8, 2013 has upheld the order of the Tribunal directing the Assessing Officer to restrict the disallowance to the extent of 2 per cent. of the total exempt income earned by the assessee. 6. In view of the above, the straightway application of rule 8D in the case of the assessee by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised service tax to the value of the opening stock in the current year was correct and therefore was upheld. The assessee has, thus, come in appeal before us against the said directions. 9. Vide ground No. 2(a), the assessee has agitated the addition of Rs. 1,47,28,838 to the value of the closing stock under section 145A of the Act on account of cenvat credit and service tax credit. The assessee alternatively, vide ground No. 2(b), has contended that if the above amount is to be added to the closing stock, the Assessing Officer ought to have added Rs. 1,18,01,670 to the opening stock on account of addition made to closing stock for assessment year 2005-06 as per assessment order dated December 15, 2006. 10. We find that the assessee had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the place of its location and condition as on the date of valuation. In the instant case, the Assessing Officer has added a sum of Rs. 1,00,42,664 towards cenvat and Rs. 46,86,174 towards service tax to the closing stock of inventories. The Assessing Officer has added a sum of Rs. 52,33,736, being the adjustment made to the closing stock value of the immediately preceding year, to the opening stock. Thus, the Assessing Officer has made a net addition of Rs. 94,95,102 to the total income of the assessee. 12. The claim of the assessee is that it is following exclusive method for accounting the cenvat and service tax and there will not be any tax implication, if the inclusive method as prescribed under section 145A of the Act is followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he "inclusive method" prescribed in section 145A of the Act is followed. However, the assessee has not furnished working to show that the "net profit" remained the same under both the "inclusive method" and the "exclusive method". Since the assessee has followed the guidance note issued by the Institute of Chartered Accountants of India, it would be in a position to demonstrate the abovesaid fact before the Assessing Officer, i.e., the assessee could establish that there was no change in the income under both methods by furnishing necessary workings. Accordingly, we are of the view that the assessee should be given one more opportunity to demonstrate this fact. 16. If the assessee fails to furnish the workings discussed above, in our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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