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TMI Blog2021 (7) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the following additions made by the Assessing Officer:- a. Rs. 3,44,000/- u/s. 14A of the Act; b. Rs. 12,50,000/- being the amount paid towards Keyman Insurance Policy of the Director of the Company treating the same as payment towards investment plan; c. Rs. 27,000/- being the amount of payment of insurance premium under employer/employee insurance scheme; d. Rs. 1,91,00/- on account of commission paid; e. Rs. 71,507/- on account of notional interest treating the same as non business expenses;" 3. Brief facts of the case shows that the assessee is a company engaged in the business of trading in gold, silver and diamond jewellery under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowances applying the provisions of Rule 8D amounting to Rs. 6,88,228/-. The ld. CIT(A) after the detailed discussion, restricted the disallowances @50% of the interest on the amount so invested and confirmed the disallowances of Rs. 3,44,000/-. Before the ld. CIT(A) the assessee categorically stated that it has not earned any tax free income during the year. We find that when the assessee has not earned any exempt income, the provision of section 14A cannot apply and no disallowance can be made. Such is the mandate of the Hon'ble Delhi High Court in Cheminvest Limited Vs. CIT 378 ITR 33 (Del). Even otherwise the proportionate disallowance of 50% of the interest expenditure cannot be upheld when there is a specific formula provided, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of the company where the life of the director Mr. Sumit Goyal was insured and in fact the maturity proceeds of the policy of Rs. 85 lakhs was received in FY 2019 - 20 which was also offered for taxation. It was further noted that except in this year in all subsequent year starting from Assessment Year 2013-14 the ld. AO has consistently allowed the insurance premium paid till the year of maturity. We find that the identical issue has been decided by the Hon'ble Delhi High Court in case of CIT v. Mr. Rajan Nanda (2012) 18 Taxmann.com 98 (Delhi) wherein, the keyman insurance premium paid by the company is allowed as deduction to the company u/s. 37(1) of the act. The issue is squarely covered in favour of the assessee In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO. Ms. Sonu Goyal could not be produced however her confirmation and income tax return have also been filed. With respect to the Ayushi Goyal it was submitted that she confirmed that she had taken 25 to 26 people to Zaveri for purchase of jewellery. She could also immediately give the name of 4 to 5 persons. Therefore, the disallowances cannot be made. The ld. AR also argued that both the recipients of commission have rendered the services to the assessee and the expenditure are incurred wholly and exclusively for the purpose of business, both of them have offered the above income in the return of income and therefore, should be allowed. However, we find that identical issue has been dealt by the ld. CIT(A) for Assessment Year 2010-11 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature and the recovery of the advance has been made on 05.05.2012. The ld. AO noted that the assessee has debited interest expenditure of Rs. 1.41 crores on account of CC cash credit account with Axis Bank from which the above payment was made and therefore, proportionate interest expenditure of Rs. 71,507/- was disallowed. The ld. CIT(A) found that the assessee has made investment out of interest bearing fund from CC Account towards non business purposes and therefore, the ld. CIT(A) has correctly made the above disallowance. 12. The ld. AR has submitted that the assessee has interest free owned funds and therefore, the disallowances of interest cannot be made. For this proposition the assessee submitted that the assessee has interest fre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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