9911796707
TMI Blog2015 (8) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... gether and are being decided by this common order. 2. The facts of the case for the assessment year 2008-09 are that the assessee is a public limited company registered with RBI as NBFC investment company. The assessee has received a dividend income of Rs. 4.82 crores and long term capital gain of Rs. 39.04 crores. The assessee claimed dividend income and long term capital gain as exempt u/s 10(35) and 10(38) of the Act respectively. The assessee suomotu disallowed a sum of Rs. 69.64 lakhs in computation of income. The AO made disallowance u/s 14A of Rs. 1,13,04,344/- computed as per the formula given under Rule 8D of the Income Tax Rules, 1962. Thus, the AO has made an addition of Rs. 50,58,468/- on account of disallowance u/s 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld.AR of the assessee has submitted that when the working under rule 8D gives contradictory result to the actual fact then the provisions of Rule 8D cannot be applied for the purpose of disallowance under section 14A of the Act. In support of this contention he has placed reliance on the decision of this Tribunal in the case of Cape Trading P Ltd V/s ACIT in ITA No.3772/Mum/2013 (AY-2010-11) dated 11.3.2015. On the other hand, the ld.DR has strongly relied upon the order of AO. 5. Having regard to the facts that the disallowance made by the AO by applying Rule 8D exceeds the amount of total expenditure debited by the assessee to the profit and loss account, we are of the view that for the purpose of disallowance u/s 14A, the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses on account of auditor fee, legal and professional fees, profession tax, business support fees cannot be said to have any direct or proximate nexus with the activity of investment or earning the exempt income. Thus the disallowance u/s 14A can be made only to the extent of allocation of these expenses which has direct or proximate nexus with earning of exempt income. From the details of the expenses, we find that the printing and stationary expenses and bank charges & commission are only two items which could have direct or proximate nexus with the investment and exempt income. Therefore, the disallowance u/s 14A r.w. Rule 8D(2)(iii) cannot exceed to the allocable expenses incurred by the assessee for a composite activity resulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses. The ld. AR submitted that the disallowance on account of interest expenditure is strategic one and the investment in question strategic in nature and not made with the intention of earning exempt income because the investment have been made in the sister concern and for commercial expediency. In support of this contention he has relied uypon the orders of Tribunal in the following cases : a) Gareware Wall Ropes Ltd V/s ACIT in ITA No.5408 and 4957/Mum/2012) dated 15.1.2014 for AY 2009-10 and b) M/s J M Financial Ltd V/s ACIT in ITA No.4521/Mum/2012) dated 26.3.2014 for AY 2009-10. The authorities below have not examined this issue by considering fact that the investment in question are in the sister concern and are in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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