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TMI Blog2011 (9) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8D of the I.T. Rules was not applicable for that year - Held that As such, Rule 8D of the Rules was not appropriately applied by the AO as correctly held by the CIT (A) - onus was on the AO to establish any such expenditure - disallowance u/s 14A of the Act requires a clear finding of incurring of expenditure and that no disallowance can be made on the basis of presumptions - Thus appeal filed by the Department is dismissed and the cross objections filed by the assessee are allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... en followed in a later decision in the case of Delhi Brass & Metal Works Ltd. (supra) and in the light of several decisions of Kerala High Court which has been affirmed by the Hon'ble Supreme Court by way of dismissal of Special Leave Petition as so noted by the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equipments (supra), and in the light of the decisions of Hon'ble Supreme Court in the case of Liberty India (supra), Pandian Chemicals Ltd.(supra) and other decisions referred to above. It is held that the AO was justified in excluding the interest income pertaining to Dadra and Sambha Units for the purpose of calculation of deduction u/s 80 IB of the Act. As a result, ground of appeal No. 2 is dismissed." 6. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to differ therefrom. As such, following the aforesaid Tribunal order in the assessee's case for assessment year 2007-08, ground No.2 raised by the Department is rejected. 10. Now. Coming to ground No.3, the Department alleges that the CIT (A) has erred in restricting the addition u/s 14A of the Act to Rs. 19,43,022, as against that of Rs. 31,01,542/- made by the AO. This issue was also there before the Tribunal in the assessee' s case for assessment year 2007-08. On behalf of the assessee, it has been contended that Rule 8D of the I.T. Rules was not applicable for that year; that however, in the year under consideration, no satisfaction has been recorded by the AO as to how the assessee' s calculation is not correct; that however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, the AO made a disallowance of Rs. 32,18,475/- by applying the method provided in Rule 8D of the I. T. Rules, 1962. This was done without pointing out any inaccuracy in the method of apportionment or allocation of expenses, as adopted by the assessee. All through, the assessee was maintained that the assessee was during the year, carrying on manufacturing activities at its manufacturing units at several places. Its head office was at Delhi. The assessee had maintained separate books of account for each unit. Common expenses incurred at the head office and the branches were attributed to all the units including the head office. Investment in mutual funds, which gave rise to exempt dividend income, was done through the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance can be made on the basis of presumptions in "ACIT v. Eicher Ltd." 101 TTJ (Del) 369, that it was held that the burden is on the AO to establish nexus of expenses incurred with the earning of exempt income before making any disallowance u/s 14A of the Act. In "Maruti Udyog v. DCIT" 92 ITD 119(Del), it has been held that before making any disallowance u/s 14A of the Act, the onus to establish the nexus of the same with the exempt income, is on the revenue. In "Wimco Seedlings Limited v. DCIT" 107 ITD 267 (Del) (TM), it has been held that there can be no presumption that the assessee must have incurred expenditure to earn tax free income. Similar are the decisions in: 1. Punjab National Bank v. DCIT, 103 TTJ 908(Del); 2. Vidyut Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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