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TMI Blog2015 (9) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi has erred in upholding the order of ld. Assessing Officer; 2. The assessee craves to add or delete any ground of appeal before the appeal is heard." 2. Brief facts as recorded by the ld. CIT are as follows: The assessee filed its return of income for the relevant assessment year on 25/09/2009 declaring a loss of Rs. 5,01,052/-. The assessee is engaged in the business of mining activities for extraction of raw clay matrix which is used by processed clay manufacturers. The Appellant has made investments in Thapar Group of Companies for earning exempt income and also controlling stakes. The appellant has shown average investments in shares of Group Companies amounting to Rs. 1,81,39,59,779/- and has earned dividend income amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted before both ld. AO as well as the ld. CIT(A). He further submitted that the ld. AO has applied Rule 8D and has further disallowed Rs. 88,38,084/- over and above the voluntary disallowance made by the appellant u/s 14A amounting to Rs. 1,39,39,685/- against the dividend earned by the appellant during the year. 6. The ld. AR submitted that AO has completely disregarded the computation of taxable income, books of accounts and division wise profit and loss account furnished by the appellant and proceeded mechanically apply Rule 8D of the Income Tax Rules, 1962. The ld. AR further submitted that the AO has neither expressed his satisfaction nor given cogent reasons before proceeding to disallow expenses u/s 14A of the Act. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r y.e.31.03.2009). It was, therefore, pleaded that personal expenses, administrative and other expenses and selling & distribution expenses should not be considered for the purposes of disallowance u/s 14A of the Act. We find force in the argument of the ld. A.R in this regard. 9. We also find that the AO has neither recorded his satisfaction nor given reasons as to how the claim of expenditure in relation to tax free income has not been correctly made by the assessee as envisaged under section 14A(2) and has mechanically invoked Rule 8D. Sub-section (2) of section 14A of the Act provides the manner in which the AO is to determine the amount of expenditure incurred in relation to income, which does not form part of the total income. 10. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicate cogent reasons for the same. It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the AO rejects the claim of the assessee in this regard. (Maxopp Investment Ltd. vs. CIT [2012] 347 ITR 272 /[2011] 203 Taxman 364/15 taxmann. Com 390 (Delhi). 11. It is seen that the appellant company itself has made the disallowance of expenditure u/s 14A r.w.r. 8D of Rs. 1,39,39,685/. The claim of disallowance made by the appellant company was examined by the AO during the course of assessment. The appellant produced the books of accounts and the evidences, which the ld. Assessing Officer had verified the ld. AO examined the books of accounts, evidences and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3I9 ITR 299 (Delhi) 13. The decision relied upon by the Revenue in the case of T&T Motors Ltd., in ITA no. 6490/Del/2010 for assessment year 2009-10 are distinguishable on facts. In the case of T&T, the assessee had argued that there cannot be any expenditure that could be disallowed against the exempt income received by the assessee therein. The Hon'ble coordinate bench has recorded in para 5 therein that the assessee had incurred certain expenses which was attributable to the earning of exempt income. However in the facts of the present case before us, the assessee has suo mote disallowed expenses under section 14A of the Act. The Ld. D.R, contended that in the event there are any deficiency left by the A.O in recording proper satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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