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TMI Blog2012 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax(A) rightly held that the disallowance made by the Assessing Officer was not proper and justified and he limited the disallowance to the extent of ₹ 68,385/-. We are unable to see any reason to interfere with the impugned order. - I.T.A. No. 2750/Del/2011 - - - Dated:- 21-9-2012 - SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For the Appellant: Mrs. Anusha Khurana, Sr.DR For the Respondent: Shri Ved Jain, Ms Rano Jain, Sh. Vebnkatesh Mohan O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal has been preferred by the Revenue against the order of Commissioner of Income Tax(A)-V, New Delhi dated 4.3.2011 for AY 2007-08. The only ground in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 24,04,840. 3. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax(A)-V. The appeal was partly allowed with the following observations and findings:- 3. Ground No.1: Disallowance u/s 14A r.w.r 80 of I.T. Act The A.D disallowed an amount of ₹ 33,07,764 under see 14A read with rule 8D as the appellant had earned tax free dividend income of ₹ 16,54,640 during the year. The appellant on its own calculated an amount of ₹ 68,385 to be the amount said to be incurred for earning the exempt income. 3.1 The A/R present for the appellant submitted that Rule 8D of the IT Rules gives only the method of determining amount of expenditure in relation to income which do not form par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied. Therefore interest payment which has got no relation with the investment, cannot be disallowed. Similarly any adhoc % on investment cannot be disallowed. More so when no substantial expenses have been incurred for earning tax exempted income. Reliance was placed on the following judgements by the appellant; 1. Godrej Boyce vs. DCIT (Bombay High Court) Rule 8D, inserted w.e.f 24.3.2008 cannot be regarded as retrospective because it enacts an artificial method of estimating expenditure relatable to tax-free income. It applies w.e.f. AY 2008-09; 2. DCIT vs. Maharashtra Seamless Ltd (ITAT Delhi) 3. Minda Investments Ltd Vs DCIT New Delhi (Delhi ITAT) 4. Honourable Supreme Court has also reiterated the same p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble disallowance in the absence of any other finding by the AO. The addition is therefore limited to this extent. Now, the Revenue is in appeal before this Tribunal. 4. We have heard rival argument of both the parties in the light of material on record before us and carefully considered the same. Ld. DR submitted that the Assessing Officer rightly relied on the judgment of Hon ble Supreme Court in the case of Commissioner of Income Tax vs United General Trust 200 ITR 488(SC) for making disallowance u/s 14A of the Act r/w Rule 8D of the Income Tax Rules 1962. He further submitted that the assessee company paid interest of ₹ 41,08,181 and the Assessing Officer rightly considered the average value of investment, asset and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. (supra) has held that the provisions of Rule 8D of the Rules which have been notified w.e.f. 24.3.2008 are not retrospective in nature and shall apply w.e.f. AY 2008-09; even prior to AY 2008-09 when Rule 8D was not applicable, the Assessing Officer had to enforce provisions of sub-section (1) of Section 14A of the Act for the purpose. It was also held that the Assessing Officer was duty bound to determine expenditure which had been incurred in relation to income which did not form part of total income under the Act by adopting reasonable basis or method consistent with all relevant facts and circumstances. The case in hand is related to AY 2007-08. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet. Therefore, disallowance made by the Assessing Officer on the basis of surmises and conjectures was rightly deleted by the ld. Commissioner of Income Tax(A). Ld. DR did not dispute the fact that the Assessing Officer noted that substantial amount of interest paid on loan taken for investment has been capitalized by the assessee during the year under consideration which is clearly reflected in the balance sheet and final accounts of the assessee but the DR submitted that apart from interest, other expenses have to be disallowed u/s 14A(1) of the Act. 9. In view of above submissions, we observe that in the case of Commissioner of Income Tax vs Hero Cycles Ltd.(2010) 323 ITR 158 (P H) , their lordships held that disallowance u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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