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TMI Blog2015 (9) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... o demonstrate that the estimation of such expenditure at ₹ 3800/- made during the original assessment proceedings was unreasonable. The CIT(A), on the other hand, has noted that estimation of such expenditure at ₹ 3800/- made in the course of original proceedings was reasonable, a finding which has not been shown to be untenable by the Revenue before us. Therefore, we find no justifiable reason to interfere with the ultimate conclusion drawn by CIT(A) for assessment year 2005-06, which is hereby affirmed. - Decided against revenue. Disallowance of interest expenditure - Held that:- CIT(A) has directed the Assessing Officer to examine whether the investments made in mutual funds were out of non-interest bearing funds or not; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in short the Act ). 2. In all the appeals, Revenue has raised a common issue which relates to the disallowance made by the Assessing Officer by invoking the provisions of section 14A of the Act. The solitary Ground raised by the Revenue is commonly worded in all the three appeals, which reads as under:- On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to disallow the expenses as per the direction of the Honourable Bombay high court in the case of M/s Godrej Boyce m Mfg. co . Ltd Vs. DCIT which is not accepted by the department. 3. The brief background of the dispute is that the respondentassessee is a company incorporated under the provisions of Companies Act, 1956 and is, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e balance of ₹ 14,54,429/- ( ₹ 14,58,229 minus ₹ 3,800/-) was added to the returned income. 5. Before CIT(A), assessee did not dispute the amount of interest expenditure of ₹ 2.07,809/- disallowed by the Assessing Officer out of the total disallowance of ₹ 14,54,429/-. For the balance of the disallowance, the assessee company contended that the Assessing Officer erred in computing the disallowance based on Rule-8D of the Rules, because the said Rule has been held to be applicable with effect from A.Y 2008-09 and is not applicable for the year under consideration, following the judgment of Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Company Ltd. vs. DCIT, 328 ITR 81(Bom). Secondly, assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue has primarily reiterated the stand of the Assessing Officer which is based on application of Rule 8D of the Rules in order to quantify the amount disallowable under section 14A of the Act. 8. On the other hand, Ld. Representative for the assessee has justified the order of CIT(A) by placing reliance thereon. 9. Having heard the rival submissions, we find no justifiable reason to interfere with the conclusion drawn by the CIT(A). Notably, the disallowance computed by the Assessing Officer based on Rule 8D of the Rules is not tenable in as much as Rule 8D is applicable only w.e.f. assessment year 2008-09 as laid down by the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Company Ltd. vs. DCIT (supra). Nevert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer applied the provisions of Rule 8D of the Rules and computed a disallowance of ₹ 46,04,325/- under section 14A of the Act, being expenditure related to the earning of such exempt income. The disallowance computed by the Assessing Officer was on account of interest expenditure as well as out of administrative expenditure, which according to him was relatable to the earning of exempt income. 13. In appeal before CIT(A), the assessee contended that the investments made in mutual funds, etc., which yielded the exempt income were made out of interest free funds, and that the interestbearing borrowed funds were not at all used for making such investments. The CIT(A), in para 5.2 of his order has tabulated the mutual funds/securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the CIT(A) set aside the action of the Assessing Officer in computing such disallowance by application of clause (ii) of Rule 8D of the Rules and instead directed the Assessing Officer to determine disallowance on a reasonable basis as per the directions of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Company Ltd. vs. DCIT(supra). Against such decision of the CIT(A), Revenue is in appeal before us. 14. In the above background, we have heard the rival Counsels and find that there is no justification for interfering with the order of CIT(A) on the aspect of the disallowance under section 14A of the Act. 14.1 In so far as, the issue relating to the disallowance of interest expenditure is concerned, the CIT(A) has d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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