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TMI Blog2015 (7) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... ,714/- on the intangible asset is hereby rejected. Disallowance u/s 14A on clause (iii) of Rule 8D(2) of the Rules - Held that:- Notably, the assessee was found to have made investments, which yielded exempted dividend income to the tune of ₹ 1,42,73,000/-. The AO invoked the provisions of section 14A of the Act and disallowed a sum of ₹ 10,31,252/- being administrative expenses relatable to the earning of exempt income; and, such disallowance was worked out by the application of clause (iii) of Rule 8D(2). Ld. CIT(A) has also sustained the disallowance by noticing that assesse has not brought any material on record to show as to how the disallowance was not reasonable.Before us, the inability of the assessee to prove unreaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A on the basis of clause (ii) of Rule 8D(2) - Held that:- Assessee has furnished the audited financial statement for the relevant period which clearly supports the inference drawn by the Ld. CIT(A). On the basis of the balance sheet as on 31/3/2009, it is quite clear that the loan funds in this year have substantially decreased than the preceding year. Further, the entire investment which yielded exempt income has been made during the year under consideration. Further the assessee has earned profit after tax of ₹ 4471.11 lacs and the share capital plus reserves and surplus of the assessee company stand at ₹ 13332.50 lacs. The aforesaid analysis of the financial statement clearly supports the inference of the Ld. CIT(A) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the earlier years. At the time of hearing before us, Ld. Representative of the assessee fairly conceded that for assessment year 2000-2001 the Tribunal vide its order in ITA No.8276/Mum/2004 dated 9/5/2008 has decided the issue against the assessee. Notably in the past years, assessee had purchased Inter Trade Division of Mahindra Mahindra Ltd. on a going concern basis and the excess of purchase consideration over the book value of the assets and liabilities taken over was considered as cost acquisition of various intangibles. The depreciation claimed on the acquisition of such intangibles was denied by the Tribunal vide its order dated 9/5/2008(supra) for the assessment year 2000-01. Following the aforesaid precedent, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on contingent factors of future obligations. The Ld. CIT(A) further noticed that the impugned amount was neither paid to the employees during the year and nor it was set apart in a separate fund and, therefore, it was an unascertained liability. 6.1 Before us the Ld. Representative for the assessee fairly conceded that similar issue came before the Tribunal in the case of the group concern M/s. Mahindra Mahindra Ltd. for assessment year 2007-08 and vide order dated 8/6/2012 in ITA No.7999/Mum/2011, similar liability has been held to be an unascertained liability which was not allowable as a deduction under section 37(1) of the Act. Following the aforesaid precedent, we hereby affirm the stand of the Lower Authorities in deciding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The AO worked out such disallowance by applying clause(ii) of Rule 8D(2) of the Rules. 10.2 Ld. CIT(A) noticed that the investments which yielded exempt income were made during the year under consideration and that no interest cost could be attributable to the same following the ratio of the judgment of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 (Bom). As per Ld. CIT(A) assessee has sufficient own interest free funds to cover the investments in exempted securities and, therefore, no interest cost would be attributable to such investments. 10.3 At the time of hearing Ld. Representative for the assessee has furnished the audited financial statement for the relevant peri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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