9911796707
TMI Blog2015 (11) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure as claimed by the appellant were in respect of professional income earned by her and the Assessing Officer did not point out / prove any instance involving expenditure in relation to earning of exempt income. iii) No regular activity carried out by the appellant for making investment, therefore no administrative expenses can be apportioned for disallowance U/S 14A. 2. In respect of disallowance of Foreign Exchange Fluctuation Loss of EEFC A/c: On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the disallowance of Rs. 3,77,580/-, being foreign exchange fluctuation loss suffered by the appellant relating to her deposit lying in the EEFC A/c with State Bank of India. i) The learned CIT(A) failed to appreciate that irrespective of cash method account followed by the appellant, she has been consistently following Accounting Standard-11 as provided in the AS-11 issued by the ICAI and accordingly profit/(Ioss) on such valuation of foreign currency has been considered as income/(loss) of the respective year in the past. ii) The appellant relies on the decision of the Supreme Court in the case of Woodward Governor India ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn these exempt income, the assessee has not incurred any expenditure . The assessee contended that the entire investments in RBI tax free bonds, mutual funds, shares etc was made out of surplus funds available with her and no borrowed funds were utilized by the assessee and hence no interest expenses were incurred nor the assessee incurred any administrative expenses with respect to making / maintaining of the investments in which exempt income is earned. The assessee also contended that the provisions of section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 are not applicable in this case and to disallow these expenses there has to be a nexus between the expenditure incurred and tax free income earned by the assessee and the disallowance cannot be made merely on a presumption. The assessee relied upon the decisions of Hon'ble Punjab and Haryana High Court in the case of Hero Cycle Private Limited 323 ITR 51, Jindal Photo Limited (Del-Trib.) in ITA no. 14(Del) 2011 and Hon'ble Delhi High Court in the case of Wimco Seeding Limited 107 ITD 267, Auchtel Products Limited (2012) 22 taxman 99(Mum-Trib.). The assessing officer after considering the replies of the assesee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the items of expenses in the Profit & Loss Account and stated that the most of the expenses have no relation with the earning of exempt income. She drew our attention to the commission paid of Rs. 1,90,000/- which was related to management fees in respect of professional work undertaken by the assessee. She also showed that there is a salary paid to peon and driver of the assessee. She also drew our attention to payments of Rs. 1,26,536/- made to auditors towards audit assignment and tax matters. So in nutshell, the assesee submitted that assessee has not incurred any expense for earning the exempt income. She relied upon the orders of Mumbai Bench of Tribunal in ITA no. 7239/Mum/2012 in the case of Shri Hrithik Rakesh Nagrath to contend that in a similar case the Tribunal has deleted the disallowance. The assessee also relied upon the decision of Mumbai Bench of Tribunal in the case of Ramu S Deora in ITA no. 4860/Mum/2012 to contend that the Tribunal while dealing with the similar case has restricted the disallowance to Rs. 10,000/-. The assessee further contended if the disallowances are to be made then for the purpose of computation of disallowance under Rule 8D(2)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- after excluding the specific expenses highlighted by the assessee incurred specifically and exclusively for earning exempt income. We have also observed that assessee has received professional income of Rs. 24 Lac during the year while the exempt income received is Rs. 1,07,53,499/- . There is no doubt that the assessee definitely has to incur higher expenses for rendering professional services and thereby earning professional receipts. The contention of the assessee that the value of jewellary of Rs. 41,63,417/- included by the assessing officer in the determination of average investment need to be excluded is to be accepted as any gain on sale of jewellary is taxable under the Act. Keeping in view the peculiar facts and circumstances of the case , the end of justice will be met if the disallowance of the expenses is restricted to 10% of common expenses of Rs. 12,83,814/- whereby the disallowance will come to Rs. 1,28,381/- u/s 14A of the Act. The amount of disallowance is restricted to Rs. 1,28,381/- keeping in view the peculiar facts and circumstances of the case and shall neither be construed as our making any aspersion on the applicability of Section 14A of the Act read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd, 301 ITR 354, and also on the decision of the Kolkata Bench of Tribunal in the case of Ashutosh Enterprises Ltd. in ITA No. 2103/Kol/2010. The CIT(A) held that the assessee is following cash basis of accounting as mentioned in her return of income and this cannot be allowed on accrual basis. Thus, the CIT(A) rejected the contentions of the assessee and dismissed the appeal of the assessee on this ground. 11. Aggrieved by the orders of the CIT(A), the assessee is in appeal before us and stated that assessee is consistently following the policy for many years of bringing to tax loss/profit on mark to market basis on account of foreign exchange fluctuation in the EEFC account balance as at year end. The assessee made the statement before us that in the EEFC account, the proceeds are credited on account of professional fees received by the assessee in the earlier years although there are no professional receipts earned in foreign currency during the relevant assessment year. Hence, the assessee submitted that it is following the hybrid system of accounting whereby these mark to market losses/profits on foreign exchange fluctuation in EEFC account at the end of the year are bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is directly linked to her profession and should be allowed as revenue expenditure incurred wholly and exclusively for her profession of cine artist. The assessing officer disallowed the said dental treatment expense being paid to Doctor for treatment of assessee teeth considering the same to be personal in nature to maintain her teeth and further the assessing officer held that no TDS has been deducted on the said payments under chapter XVIIB of the Act and hence the expenses of Rs. 1,74,850/- incurred by the assessee and as claimed as Revenue Expenses of profession of cine artist carried on by the assessee was disallowed u/s 40(a)(ia) of the Act. 16. Aggrieved, the assessee carried the matter in appeal to the CIT(A) and contended that she is an actress and she has to maintain her personality and beautification which is the need of profession and the expenses of Rs. 1,74,850/- incurred by the assessee is revenue expenditure incurred for her profession of cine artist. The CIT(A) accepted that since the assessee is actress and the said expenses are linked to her profession but the CIT(A) upheld the disallowance of the said expenses of Rs. 1,74,850/- on the ground that no TDS u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
