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TMI Blog2013 (11) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... d going through the averments made therein, which stand exhibited, we find the delay as suitably explained. The appeal was accordingly admitted, and the hearing is proceeded with. 3. The only issue arising in the instant appeal is the disallowance u/s.14A, effected in assessment at Rs.39,94,365/-, since restricted by the ld. CIT(A) to Rs.4,41,686/-. 4. We have heard the parties, and perused the material on record. 4.1 While the basis of the Assessing Officer's (A.O.'s) disallowance was Rule 8D, mandatory w.e.f. the current year, the ld. CIT(A) allowed relief on the basis that the assessee had incurred interest expenditure at Rs.1,93,500/-, and the indirect expenditure, which could be considered as relevant for the purposes of dividend income, i.e., on the assessee providing the details of the total administrative expenditure of Rs.3,67,436/- (Schedule L to its Balance Sheet / PB pgs.9, 27 & 28), is only Rs.2,48,186/-. 4.2 The assessee's case, relying on the decisions in the case of CIT vs. Reliance Industries Ltd. [2011] 339 ITR 632 (Bom) and Maxopp Investment Ltd. vs. CIT [2012] 347 ITR 272 (Delhi), is that the disallowance could only be with reference to the expenditure actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A), to make a claim in respect of the expenditure incurred in relation to the income that does not form part of the total income, is on the assessee. Once the assessee makes such a claim with reference to its accounts, the A.O. is bound to examine the same for the purpose of satisfying himself with regard to its correctness or otherwise, and where not satisfied, determine the same in accordance with the prescribed method. Further, therefore, though there is no specific requirement of recording dissatisfaction, it is incumbent on A.O. to do so, as in its absence it cannot be ascertained if he had actually examined the assessee's claim or proceeded mechanically. Two, his order being appealable, it is only where it bears his reasons, could the validity thereof and, thus, of his action of disallowance u/r. 8D, be subject to judicial review. It is in this context that it has been held that the said dissatisfaction has to be explicit and informed. The same, thus, is not a jurisdictional requirement, but toward completing the inbuilt fairness of the procedure as provided for. The requirement of recording dissatisfaction predicates on the discharge of the onus cast on the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only qua indirect expenditure. 4.5 The Revenue's case, on the other hand, is also not without blemish. The ld. CIT(A) has confirmed the interest disallowance at Rs.1,93,500/-, even as the A.O. himself, following the prescription of rule 8D, worked out the same at Rs.1,72,890/-. The ld. CIT(A) has also considered the total administrative expenditure, i.e., which is not solely in relation to income forming part of the total income, as toward the tax-exempt income. He has, as it appears, in doing so, been guided by the fact of the dividend income being at Rs.101.10 lacs, and profit on sale of investments at Rs.70.42 lacs, besides perhaps by the disallowance u/r. 8D per se working out to a much higher figure (Rs.39.94 lacs). The volume of the tax-exempt income is an irrelevant consideration. The ld. CIT(A) has, in restricting the disallowance qua indirect expenditure (other than interest) to the expenditure incurred by the assessee, i.e., Rs.2.48 lacs, as against Rs.38.21 lacs in terms of rule 8D(2)(iii) (@ 0.5% of the average investment), himself not applied rule 8D per se. That is, found rule 8D(2)(iii) as not strictly applicable in the facts of the case. The same is in order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tribunal directed the restriction of the disallowance workable with reference to rule 8D(2)(ii) to 20% thereof. It was explained that shares, which yield the tax-exempt dividend income, interest qua which is to be disallowed, being held as stock-in-trade, also yield share trading income, which is taxable. Therefore, to say that the entire interest relatable to the average share holding is to be attributed to the tax-exempt dividend income would be patently incorrect on facts. Further, that the shares are in fact bought and held primarily for trading purposes, further accentuates the apparent incongruity of the situation that would arise on a mechanical application of r. 8D(2), so that the amount as per r. 8D(2)(ii) would need to be scaled down, bifurcating the expenditure so arrived at between these two incomes. The same, it was further explained, is not a break down or failure of r. 8D, but is mandated by the language of r. 8D(2)(ii) itself inasmuch as it prescribes or authorizes a disallowance only qua investment, income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income, is only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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