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TMI Blog2013 (9) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any working of disallowance by assessee, the Assessing Officer has rightly apportioned the expenses in the ratio of Exempt Income to total income. 3. The Ld. CIT(A) has overlooked the fact that even though the apportioned of expenses was correctly made, alternatively the CIT(A) ought to have worked out the disallowances u/s 14A as per working under rule 8D confirmed by Bombay High Court in the case of Godrej & Boyce. 4. The Ld. CIT(A) has erred in deleting the addition u/s 69 of Rs. 5 lacs. 5. The Ld. CIT(A) has further erred in accepting the fresh evidence in violation to Rule 46A." 2. Brief facts of the case are that, in the present case, the assessee is engaged in the business of investments and financing wherein under the investment activities, the assessee undertakes acquisition of shares and securities and under the financing activities, it takes placement of deposits, etc. The Assessing Officer, during the course of assessment proceedings, noted that the assessee has claimed exempt income of Rs. 7,09,157, comprising of dividend from the companies and mutual funds. He noted that the assessee has not made any disallowance under section 14A, in relation to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He drew our attention to various expenditures debited in the Profit & Loss account and submitted that most of the expenditures were not directly or indirectly attributable to earning of exempt income. Therefore, the disallowance of Rs. 45,000 is justified. 6. We have heard the rival contentions and perused the relevant material on record. Admittedly, the assessee has earned exempt income of Rs. 7,09,157, as dividend and no expenditure under section 14A was disallowed by the assessee. The Assessing Officer also, without any basis, has taken 17% of the administrative expenditure without looking to the nature of expenditure debited in the Profit & Loss account. Looking to the fact that the assessee has not incurred any interest expenditure, the disallowance of Rs. 45,000 on account of other administrative expenditure seems to be reasonable. Consequently, we do not find any reason to disturb the findings given by the Commissioner (Appeals) and the same are hereby upheld for the reason that, admittedly, the provisions of rule 8D are not applicable for the assessment year 2005-06 as held by the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, (2010), 328 ITR 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence in the form of proof of investment made by the Brook Trading Company Pvt. Ltd., by way of photocopy of cheque and bank statement. Thus, there is a clear cut violation of rule 46A of the income tax rules and, therefore, the matter should be restored back to the file of the Assessing Officer. 10. On the other hand, the learned Counsel for the assessee submitted that the assessee has merely clarified before the Commissioner (Appeals) that second investment was not made by the assessee but by associate concern Brook Trading Company Pvt. Ltd. and in support of that photocopy of cheque book, bank statement and proof of investment was given. These documents do not require any examination of facts but mere verification because bank statement cannot be held to be additional evidence. He, thus, strictly relied upon the findings of the Commissioner (Appeals). 11. We have heard the rival contentions and have perused the relevant findings of the Commissioner (Appeals) as well as of the Assessing Officer. The assessee, before the Assessing Officer, contended that it has made investment of Rs. 5,00,000 only in Reliance Mutual Funds and the second investment of Rs. 5,00,000 has not been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire expenditure for earning of exempt income under section 14A. After rejecting the assessee's explanation, he held that 42% of the expenditure which is in proportion to the exempt income from the total income, expenditure should be disallowed. Accordingly, he worked out the disallowance under section 14A at Rs. 17,88,312. 14. Before the Commissioner (Appeals), it was contended that the assessee has not incurred any interest expenditure and attributing 42% of the various expenditure is wholly unjustified looking to the over all business activities of the assessee for which the assessee has incurred expenditure. The Commissioner (Appeals), after considering the assessee's submissions, has restricted the disallowance of Rs. 1,00,000 on account of managerial and administrating expenditure. The relevant observations and findings of the Commissioner (Appeals) is reproduced herein below:- "4.3 I have considered the A.O.'s order as well as the appellant's A/R submission. Considering the same, I find that the A.O. has merely disallowed the expenses on proportionate basis. The A.O. has not root out a single reason for making such disallowance. However I agree with the A.O. that the no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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