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TMI Blog2012 (12) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... owance can be made on the basis of presumptions – disallowance deleted – in favor of assessee. - IT APPEAL NO. 1707 (DELHI) OF 2011 - - - Dated:- 11-5-2012 - A.D. JAIN AND T.S. KAPOOR, JJ. A.K. Chopra and V.K. Garg for the Appellant. K.K. Mishra for the Respondent. ORDER T.S. Kapoor, Accountant Member - This is an appeal filed by the assessee against the order of Ld CIT(A)-XVII, New Delhi dated 31.10.2011 for assessment year 2008-09. The grounds raised by the assessee are as under:- 1. That on the facts and law involved the Ld CIT(A) has erred in confirming the disallowance of Rs. 8,90,039/- out of expenses other than interest u/s 14A in relation to exempt income i.e. dividends. On facts, hardly any expense ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case are that the assessee is a private limited company and it has filed its return of income on 26.9.2008 for the assessment year 2008-09 declaring total income of Rs. 1,85,58,070/-. The case was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that the assessee had investments of Rs. 19,09,17,153/- in shares from which the income being dividends is exempt. The Assessing Officer further observed that though the assessee had itself disallowed interest of Rs. 79,82,413/- being directly attributable to the investment in shares, it has not disallowed any expenditure relating to administrative and managerial services and in view of that he added back an amount of Rs. 8,90,039/- being 0.5% of average inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides the procedures by which disallowance u/s 14A is to be computed.. The Assessing Officer has computed the disallowance as per the procedure provided in Rule 8D. The submission of the appellant that the Hon'ble ITAT has deleted the addition in assessment year 2007-08 is not of much help as Rule 8D was not applicable in the assessment year 2007-08. The Hon'ble Mumbai High Court in the case of Godrej Boyce Manufacturing Co. Ltd. has held that the disallowance u/s 14A of the Income Tax Act, 1961 has to made in accordance with Rule 8D. In the case under consideration, the Assessing Officer has made disallowance under Rule 8D by computing 0.5% of average investment. I am of the considered opinion that Rule 8D has been correctly applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated that management of such huge investments cannot be done without making any expenditure. As the decision of making investment and selling thereof are taken at the highest level of management, some expenses debited in the Profit Loss Account must be attributed to the earning of exempt income. Ld DR further pointed out that Ld CIT(A) has passed the order after carefully considering the facts of the case and is based upon various judicial pronouncements. 8. The Ld. counsel invited our attention to written submissions filed by him saying that section 14A is not mandatory as was held by the Special Bench, Mumbai in the case of Daga Capital Pvt. Ltd. (supra) and also on the judgment of Hon'ble Punjab Haryana High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in relation to such income which does not form part of total income. We have gone through the citation which was used by CIT(A) to upheld the decision of Assessing Officer. Their Lordships has held as under:- "Under sub-section (2), the Assessing Officer required to determine the amount of expenditure incurred by an assessee in relation to such income which does not form part of total income under the Act in accordance with such method as may be prescribed. The method having regard to the meaning of expression prescribed in section 2(33) must be prescribed by Rule made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment itself in so far as Their Lordships has held that the Assessing Officer must in the first instance determine whether the claim of the assessee is correct and determination must be made having regard to the accounts of the assessee. The legislature directs him to follow rule 8D only where the Assessing Officer is not satisfied with the claim of assessee. In the present case, the Assessing Officer has not fulfilled his onus of recording his findings. This point has also been considered in various other judicial pronouncements of Hon'ble High Court specifically in the case of Hero Cycles Ltd.'s case (supra) citation by Hon'ble Punjab Haryana High Court in 2009 wherein under similar circumstances, it was held that the disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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