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TMI Blog2012 (3) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri O.P. Dua Shri P.N. Bhatia, Advocates Respondent by: Mrs. Pratima Kaushik, Sr. D.R. ORDER PER K.G. BANSAL : A.M The facts of the case are that the assessee-company filed its return on 30.09.2008 declaring total income of Rs. 20,28,20,185/-. The assessment proceedings were taken up by issuing a notice u/s 143(2) on 11.08.2009. It was found that the assessee is engaged in the business of manufacturing of and trading in footwear. Coming to the specifics, it is mentioned in the assessment order that the assessee had made investment the income from which is not includible in the total income. Therefore, expenditure has to be disallowed u/s 14A of the Income-tax Act read with Rule 8D of the Income-tax Rules. Such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision before Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT, (2010) 194 Taxman 203 and also before Special Bench of Mumbai Tribunal in the case of ITO Vs. Daga Capital Management Pvt. Ltd. (2009) 117 ITD 169. The Hon ble Bombay High Court has upheld the validity of Rule 8D. Further, it has been held that the rule applies in relation to assessment year 2008-09 and onwards. In view of this discussion, the disallowance of Rs. 33,337/- made by the AO has been upheld. 1.2 Aggrieved by this order, the assessee is in appeal before us. It has taken up four grounds in the appeal. It is explained to us by the ld. counsel for the assessee that the gist of the grounds is that the ld. CIT(Appeals) erred uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, the expenditure is in-built once an investment is made. It is the accepted proposition of law that the expenditure to be disallowed has to be worked out under Rule 8D. This is what has been done by the lower authorities. Therefore, it is strongly agitated that the expenditure disallowed by the lower authorities may be upheld. 3. We have considered the facts of the case and submissions made before us. The admitted facts are that the assessee had made investment in shares, units and NSCs. Although it is made out that the certificates have been lost and no interest thereon has been paid, there is no evidence to this effect. The assessee can very well claim the principal amount and interest on the certificates on or after the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (not being in the nature of capital expenditure) laid out or expended wholly or exclusively for the purpose of making or earning such income from income chargeable under the head income from other sources . There are a number of decisions which hold that the earning of the income in a particular year is not sine qua non of allowing expenditure. Thus, the income may be nil, yet the expenditure incurred in pursuit of earning such income is deductible. We are of the view that similar proposition will apply while interpreting the aforesaid provision contained in section 14A(1). Therefore, we are not in agreement with the ld. counsel in respect of first line of argument. 3.2 The second question is-whether, there is an assumption of expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verify the correctness of such claim. If he is satisfied with the claim, there will be no question of any dispute. In such an eventuality, the AO cannot embark upon a determination of the amount of expenditure to be disallowed for the purpose of section 14A(1). However, where he is not satisfied with the claim of the assessee, he will have to hear the assessee and thereafter record the reasons for not accepting the claim. 3.4 We also find that in the case of Godrej Boyce Manufacturing Co. Ltd. (supra), the decision is that prior to assessment year 2008-09, the AO can make reasonable disallowance after considering all the facts of the case. Obviously the consideration has to be in respect of expenditure incurred in relation to earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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