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TMI Blog2018 (6) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... of the exempt dividend income was not to be accepted. - Decided in favour of assessee. Addition on account of difference in the account of M/s Continental Warehousing Corporation (NS) Ltd. - CIT-A deleted the addition - HELD THAT:- The difference had arisen on account of non-posting of a TDS entry by the aforementioned party viz. Continental Warehousing Corporation (NS) Ltd, in the account of the assessee as appearing in its books of accounts. We find ourselves to be in agreement with the contention of the ld. A.R that the failure on the part of the aforesaid party to post the TDS entry leading to the impugned variance to the said extent, as against the balance shown by the assessee to be payable to the said party, will not have any bearing on the income of the assessee for the year under consideration - no addition in respect of the impugned variance was called for in the hands of the assessee. Addition on account of Opening balance - difference in the account of the aforementioned party viz. M/s Continental Warehousing Corporation (NS) Ltd - HELD THAT:- We are of the considered view that as the difference in the opening balance had emerged on account of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Rules 1962. The Assessing Officer erred in applying provisions of section 14 A of Income Tax Act 1961 read with Rule 8D of Income Tax Rules 1962. Reasons given by the Assessing Officer while making above addition are insufficient and contrary to the facts and evidence on records and without application of mind. 2. Addition of ₹ 33,956/- on account of difference in reconciliation with balance as per the books of account of the assessee and as per the books of account of Continental Warehousing Corporation (N.S.) Ltd. The Assessing Officer erred in making addition of a sum of ₹ 33,956/- being difference in closing balances as on 31st March 2010 as per the books of account of the assessee and Continental Warehousing Corporation (N.S.) Ltd. Reasons given by the Assessing Officer while making above addition are insufficient and in spite of the fact that the Assessee has given full particulars of the difference and explained that the difference is due to incorrect entries passed by Continental Warehousing Corporation (N.S.) Ltd. in its books of account. 2. Briefly stated, the facts of the case are that the assessee company which is engaged in the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be attributed to either making or monitoring of the said investments. It was thus the claim of the ld. A.R that as no expense was incurred for earning of the tax free dividend income by the assessee, hence the disallowance made by the A.O under Sec.14A r.w. Rule 8D and sustained by the CIT(A) was liable to be struck down. Alternatively, it was submitted by the ld. A.R that even otherwise the disallowance of ₹ 2,29,151/- made by the A.O under Sec. 14A was substantially excessive. The ld. A.R in order to fortify his aforesaid contention submitted that in its own case for A.Y 2005-06 a coordinate bench of the Tribunal viz. ITAT A bench, Mumbai had held a disallowance under Sec. 14A of ₹ 25,000/- as reasonable in the case of the assessee. It was further submitted by the ld. A.R that the lower authorities failing to appreciate the explanation of the assessee in the right perspective, as regards the reasons leading to the variance in the balance reflected against the account of M/s Continental Warehousing Corporation (NS) Ltd. in the books of account of the assessee, as in comparison with that shown by the aforesaid party, had wrongly made an addition of ₹ 33,956/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance under Sec. 14A was liable to be made in its hands by holding a conviction that it was beyond comprehension that no expense incurred by the assessee could be related to earning of exempt dividend income. We are of the considered view that in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT Anr. (2017) 394 ITR 449 (SC), it was obligatory on the part of the A.O to have recorded his satisfaction, having regard to the accounts of the assessee, as to why the latters claim that no expenditure was attributable to earning of the exempt dividend income was not to be accepted. The Hon‟ble Supreme Court while deliberating on the said issue at length had observed as under: 37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained and is liable to be vacated. We thus, set aside the order of the CIT(A) and delete the disallowance of ₹ 2,29,151/- made by the A.O under Sec.14A r.w. Rule 8D. 8. We shall now advert to the addition of ₹ 33,956/- made by the A.O on account of difference in the account of M/s Continental Warehousing Corporation (NS) Ltd. We find that the assessee had submitted before the lower authorities that the aforesaid difference of ₹ 33,956/- was on account of two reasons viz. (i) non-posting of TDS entry of ₹ 32,346/- by the aforesaid party viz. M/s Continental Warehousing (NS) Ltd; and (ii) difference in opening balance of ₹ 1,610/-. We find that both of the lower authorities had summarily disregarded the claim of the assessee, not only as regards the reasons leading to the impugned variance in the respective balances, but rather had also brushed aside its contention that the said variance would not have any bearing on the income of the assessee for the year under consideration. We have deliberated on the conceded facts leading to the aforesaid variance of ₹ 33,956/- and find substantial force in the claim raised by the assessee before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 4,06,350/- by applying provisions of Rule 8D of Income Tax Rules 1962, are wrong insufficient and contrary to the facts and evidence on record. 3. In the facts and circumstances of the case and in law the A.O. erred in disallowing ₹ 50,000/- out of other administrative expenses of ₹ 3,27,492/-. 4. The appellant craves leave to add, amend, alter, modify or omit any of the aforesaid Grounds of Appeal as occasion may arise of demand. 12. Briefly stated, the facts of the case are that the assessee had e-filed its return of income for A.Y 2011-12 on 29.09.2011, declaring total income at ₹ 4,07,58,340/-. The income of the assessee was assessed under Sec. 143(3) at ₹ 4,12,14,690/-. During the course of assessment proceedings, the A.O had inter alia made the following additions/disallowance: Sr. No. Particulars Amount 1. Disallowance under Sec.14A r.w. Rule 8D ₹ 4,06,350/- 2. Disallowance of administrative expenses ₹ 50,000/- 13. We shall first advert to the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not as per the mandate of the judgment of the Hon‟ble Supreme Court in the case of Godrej Boyce Manufacturing Company Vs. DCIT and Anr. (2017) 394 ITR 449 (SC), hence the same cannot be sustained and is liable to be vacated. The order passed by the CIT(A) in context of the issue under consideration is set aside and the disallowance under Sec. 14A r.w Rule 8D of ₹ 4,06,350/- sustained by the CIT(A) is deleted. The Ground of appeal No. 1 and 2 raised by the assessee is allowed. 14. We shall now advert to the disallowance of amount of ₹ 50,000/- made by the A.O out of the administrative expenses of ₹ 3,27,482/- which were booked by the assessee in its profit and loss account. We find that the A.O while making the disallowance of ₹ 50,000/- had observed that on verification of the bills and vouchers pertaining to the administrative expenses, some bills/vouchers were found to be undated or unsigned and many vouchers were not supported with relevant bills. We have deliberated on the aforesaid observations of the lower authorities and are unable to persuade ourselves to subscribe to the same. We find that though there is a mention by the lower authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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