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TMI Blog2017 (3) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, an amount of ₹ 92,88,538/- (Rs. 1,11,21,08l - 18,32,543) only was rightly sustained and the assessee gets the consequential relief, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the ground nos. 1 & 2 raised by the Revenue. Disallowance of prior period expenses - Held that:- The perusal of the invoice shows that the appellant company purchased the raw material through this invoice which is dated 11.03.2007. The same had been reportedly sent from Kochi (Kerala) to Chennai factory of appellant company. As per the invoice, the said raw material was delivered to the assessee company on 30.04.2007, as certified by the representative of the authorized carrier. This fact has been recorded at part II, S1. No. 43/30/4/07, which has been reflected on the face of the invoice itself. The AO has not given any reason to disbelieve the invoice after acknowledging the same. From the documents, it is clear that the raw material was received during the current year, even if it was bought on 28.03.2007. As the liability got crystallized during the current year, such expenses are ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The brief facts of the case are that the assessee is engaged in the business of manufacturing of engineering plastic and fish net twines. The assessee filed its return of income showing loss of ₹ 29,59,46,143/- on 29.09.2008. The return was revised on 31.3.2010 by claiming prior period expenditure amounting to ₹ 51,81,578/- and loss was declared at ₹ 30,24,23,126/-. The revised return was processed u/s. 143(1) of the I.T. Act. The case was selected for scrutiny and the AO completed the assessment u/s. 143(3) of the I.T. Act, by making a disallowance of ₹ 5,35,65,500/- u/s. 14A of the I.T. Act, 1961 at a loss of ₹ 24,36,76,000/- vide his order dated 28.12.2010. 4. Against the said order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 21.1.2014 has partly allowed the appeal of the assessee. 5. Aggrieved with the aforesaid order of the Ld. CIT(A), Revenue is in appeal before the Tribunal 6. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal and stated that the Ld. CIT(A) has wrongly deleted the additions. 7. On the contrary, Ld. Counsel of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also not been disputed by the appellant in its computation being expenditure component relating to administration and managerial expenditure attributable to earning of exempt income. However, the appellant has objected the disallowance under Rule 8D(2)(ii) of the IT Rules, since it has already been accepted by the AO that before 31st March, 2005, an amount of ₹ 875.04 lac has been utilized for investment and remaining loan was for business purposes. Since then no new investment in shares has been made by the appellant and various loans obtained by the appellant have been utilized for specific purpose of business working capital requirement. The appellant's argument have force and it is undisputed that the AO had determined in AY.2006-07, the loan amount of 857.04 lac utilized for investment in shares out of total borrowings of ₹ 4612.12 lac and same has been followed in A Y 2007 -OS as the quantum of investment in shares remained unchanged. The facts being the same during the year under consideration and the amount of disallowance has already been disallowed by the appellant under Rule 8D(2)(i) of IT Rules as directly attributable expenditure; there remains no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Maintenance and Freight on Sales, no documentary evidences in support of the claim that the liability got crystallized during the current year have been filed by the appellant and therefore, the AO was justified in disallowing the same. In the result, the appellant gets a relief of ₹ 12,32,814/- out of total addition of ₹ 51,81,578/-. The grounds of appeal are partly allowed. In the result, the appeal of the appellant is partly allowed. 8.1 On perusing the above finding of the ld. CIT(A), with regard to ground no. 1 2, we note that this issue relates to against the addition on account of disallowance of ₹ 5,35,65,500/- made by the AO u/s 14A of the Act after applying Rule 8D of the Act. The assessee had suo-moto made disallowance of ₹ 18,32,500/- u/s.14A of the Act. The disallowance has been made by the AO after invoking Rule 8D(2)(ii) and 8D(2)(iii) of the IT Rules, 1962 and the AO observed that there are no direct expenses relating to the investments yielding exempt dividend income. The issue of disallowance has been subject matter of dispute in appellant's case since A Y 2006-07 onwards so much so that the matter reached upto t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of IT Rules as directly attributable expenditure; there remains no justification for making further disallowance under Rule 8D(2)((ii) of IT Rules. Thus, total disallowance uls 14A of the Act comes at ₹ 1,11,21,08l/-. Thus, out of total addition on account of disallowance of ₹ 5,35,65,500/- made by the AO uls 14A of the Act, an amount of ₹ 92,88,538/- (Rs. 1,11,21,08l - 18,32,543) only was rightly sustained and the assessee gets the consequential relief, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the ground nos. 1 2 raised by the Revenue. 8.2 With regard to ground no. 3, we find that as against the disallowance of ₹ 51,8l,578/- as prior period expenses. The assessee had not made this claim in its original return. However, a revised return was filed on 31.03.2010 by claiming prior period expenses amounting to ₹ 51,8l,578/-. In support of these expenses, the assessee had filed the copy of invoice raised by M/s Fertilizers Chemicals Travancore Ltd. amounting to ₹ 12,32,814/- in respect of raw material consumption. The AO disallowed the en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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