Disallowance u/s 14A rw Rule 8D to be calculated by taking investments that yielded dividend income: ITAT

Disallowance u/s 14A rw Rule 8D to be calculated by taking investments that yielded dividend income: ITAT

The assessee is a widely held company deriving income from its business of cultivation and manufacturing of tea and investment in shares and securities. The assessee had filed its return of income declaring loss of Rs. 57,45,310. In the course of assessment dates u/s. 143(3) of the Act, Ld. AO enquired on the claim of certain expenses made in the P&L Account for their justification. Considering the submissions and explanations of the assessee, Ld. AO proceeded to complete the assessment by making the addition of Rs. ,01,473.

Appeal before CIT(A): Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) before whom submissions were made for each of the grounds taken in appeal, who gave partial relief on certain additions and sustained the others.

Appeal before ITAT: Aggrieved by the additions so sustained, the assessee appealed before the Tribunal whereby it remitted this matter to the file of Ld. AO for the limited purpose of verification of fact averted by the assessee. Expenditure incurred by the assessee for purchase of store items like knives, wrenches etc. which costs less than Rs. 5000 per piece. are a general expenditure for tea garden which is commensurate to the line of business in which the assessee is therefore AO was directed to delete the disallowance made in this respect. Similarly, ad-hoc disallowance of Rs. 67,191 from the miscellaneous/general expenses claimed by the assessee were also asked to be deleted. The addition of Rs. 4,73,695 made was to be verified and examined in accordance with the law so the ground was restored to the file of AO. With respect to disallowance of Rs. 3,87,497 u/s. 14A of the Act, the tribunal resolved on the decision given in DCIT v. Rasoi Ltd. in 407 ITR 126that The own fund of the assessee is far in excess of the value of investment made by the assessee and, therefore, the provision of section 14A of the Act are not applicable“. The tribunal directed the AO to recalculate the disallowance by taking investments that yielded dividend income directed the Ld. AO to verify the claim of the assessee and recompute the disallowance u/s. 14A read with Rule 8D in terms of the judicial precedents relied upon by the assessee

The disallowance of Rs. 79,945 towards expenditure incurred by the assessee for which it has been alleged by the ld. AO that these are paid in cash in excess of Rs. 20,000 as prescribed u/s. 40A(3) of the Act, the tribunal decided to set aside this issue to the file of ld. AO for limited purpose of verification and examination of documents furnished by the assessee and decide the matter in terms of law. Hence, the appeal was partly allowed.

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