ITAT deleted disallowances of interest expenditure
ITAT deleted disallowances of interest expenditure
Next Media Works Ltd's received dividend income. AO disallowed incurred expenses on exempt income u/s 14A (of Income Tax Act, 1961). AO disallowed directors' sitting fee holding it was in nature of professional fee, paid without deducting TDS u/s 194J (of Income Tax Act, 1961). CIT(A) confirmed disallowances. ITAT deleted disallowances of interest expenditure as shares were not purchased from borrowed funds, and held no deduction is required u/s 194J (of Income Tax Act, 1961) out of such director's sitting fees.-500629
1. AO found that the Next Media Works Ltd's investment in shares and securities was Rs.9631.12 lacs as against the previous year's closing balance of Rs.7,433.93 lacs.
2. It had received dividend income of Rs.1.06 lacs.
3. AO held that assessee had earned exempt income, and incurred expenses and same were related to earning of exempt income, and were not allowable u/s 14A (of Income Tax Act, 1961).
4. AO noted that assessee had disallowed Rs.63,523 paid as STT in its return of income.
5. AO held that disallowance was not satisfactory if quantum of investment made and the dividend received were considered.
6. AO made disallowance u/s. 14A (of Income Tax Act, 1961) r.w. Rule 8D (of Income Tax Rules, 1962).
7. AO held that directors' sitting fee was in nature of professional fee paid, and assessee was required to deduct tax at source u/s 194J (of Income Tax Act, 1961).
8. AO disallowed the claim made by the assessee.
9. FAA confirmed disallowance as assessee was required to deduct tax at source.
On appeal, the ITAT held as under:
10. If the shares were not purchased from the borrowed funds then there was no justification in making disallowance of interest expenditure.
11. The AO and the FAA have without considering the relevant facts made the disallowance
12. Following HDFC Bank Ltd.(supra) decision by the Hon'ble jurisdictional High Court we decide ground A in favour of the assessee.
13. ITAT followed Bharat Forge Ltd.(supra), where the Tribunal held that no tax is required to be deducted u/s 194J (of Income Tax Act, 1961) out of such director's sitting fees, and deleted the disallowance on fees paid to the director.
Case Reference - M/s. Next Media Works Ltd. (Formerly known as Midday Multimedia Ltd) vs The DCIT.
INCOME TAX APPELLATE TRIBUNAL,MUMBAI "B" BENCH
Before S/Sh. Rajendra,Accountant Member & Saktijit Dey,Judicial Member
ITA No.2738/Mum/2013,
(Assessment Year-2009-10)
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