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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dt.18.12.2013 of CIT(A)-4,Mumbai, the assessee has filed the present appeal. Assessee-company,engaged in the business of trading and investment in shares, filed its return of income 01.10.2010, declaring total income at Rs.Nil and book profit u/s. 115JB of the Act at Rs.11,29,65,950/-.The assessment order u/s.143(3) of the Act, was passed on 04.12.2012, determining the total income of the assessee at Rs.Nil, the AO calculated the book profit u/s. 115JB of the Act Rs.11,47,62,323/-. As the book profit was more that the income computed as per the normal provisions of the Act,so the AO took the book profit for taxation purposes.
2.During the course of hearing before us, the assessee filed an application for admitting additional ground of appeal.It was stated that the only ground challenging the disallowance made by the AO u/s. 14A r.w. Rule 8D had been raised, that it had been taxed as per MAT provisions for the year under consideration, that the ground challenging the disallowance u/s. 14A as per MAT provisions u/s. 115JB was inadvertently not agitated. The Authorised Representative (AR) of the assessee stated that additional ground raised by the assessee was legal in nature and did not require enquiry about the facts. Departmental Representative (DR) left the issue of admitting of additional evidence to the discretion of the Bench. We are of the opinion that the issue raised by the assessee is pure legal issue, therefore, additional ground raised by the assessee is admitted.
1212/M/14-PET Fibres Ltd.
3.The first effective Ground of Appeal is about confirmation of disallowance of Rs.18.21 lakhs made by AO r.w. Rule 8D.During the assessment proceedings,the AO fund that the assessee had made investment of Rs.35.93 crores, it had received exempt income u/s.10 of the Act of Rs.48/-, that the assessee had disallowed sum of Rs.25,000/- as per provisions of section 14A of the Act. Vide order sheet entry,dated 9.11.2012,the assessee was asked as to why disallowance should not be made u/s. 14A of the Act in accordance to Rule 8D(2) of the Act. After considering the reply of the assessee,dated 19.12.12,the AO held that the term expenditure occurring in Sec.14A would take in its sweep not only direct expenses but also all forms of expenditure regardless of whether they were fixed , variable, direct, indirect, administrative, managerial or financial.Applying the provisions of Rule 8D, the AO made a disallowance of Rs.17.96 lakhs to the total income of the assessee.
4.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that assessee had earned dividend income of Rs.48/-,that it had incurred various expenses for its business to maintain its corporate status and had disallowed Rs. 25,000/- as disallowable u/s.14A of the Act, that the AO had attributed Rs.18.21 lakhs as expenditure in relation to earning of exempt income, that he had reduced exemption available to the assessee u/s.10(34)/115JB of the Act, that the expenses incurred were administrative and statutory in nature, that same were not incurred for earning dividend income, that no expenditure could be allocated towards exempt income in the terms of section 14A of the Act r.w. Rule 8D. After considering submission of the assessee and the assessment order,the FAA referred to the order of his predecessor for the AY.2007-08 and upheld the disallowance made u/s. 14A of the Act. He further held that the assessee had invested Rs.36.92 crores and Rs.35.93 crores on 31.3.2009 and 31.3.2010 respectively, that the income from those investments were not includible in the total income of the assessee, that expenditure claimed by it could be considered to have been incurred for income not includible in the total income,that the assessee could not establish the nexus between the entire capital being invested in the securities, that the assessee had not given any details to work the direct nexus of interest expenditure to the exempt income .Finally, he upheld the disallowance of Rs.17.96 lakhs .
5.Before us,the Authorised Representative (AR) contended that the assessee had received dividend income of Rs.48/- only, that on its own it had disallowed Rs.25,000/-, that it had paid security transaction tax of Rs.6.19 lakhs,that AO had disallowed Rs.18.21 as expenditure 2
1212/M/14-PET Fibres Ltd.