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TMI Blog2013 (1) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2006-2007 was filed by it on 22.10.2006 declaring total income of ₹ 10,75,67,534/-. In the said return, dividend income of ₹ 77,84,289/- was claimed to be exempt by the assessee and a disallowance of ₹ 3,89,214/- was made under section 14A on account of expenses claimed to be incurred in relation to earning of the said exempt income. In the assessment completed under section 143 (3), the Assessing Officer worked-out the expenses incurred by the assessee for earning of the exempt dividend income at ₹ 49,29,454/- by applying Rule 8D of the I.T. Rules, 1962 and made further disallowance of ₹ 45,32,240/- under section 14A. 3. The disallowance made by the Assessing Officer under section 14A was challenged by the assessee in an appeal filed before the CIT(A) and it was contended on behalf of the assessee before the CIT(A) that Rule 8D is not applicable to assessment year 2006-2007 as held by Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. 328 ITR 81 (Bom.). It was also contended that as per the said decision of the Hon'ble Bombay High Court, the disallowance for the years prior to assessment year 2008-2009 requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He contended that this basis suggested by the assessee has been found by the learned CIT(A) as reasonable and no argument has been raised by the learned D.R. to show that the basis suggested by the assessee and accepted by the learned CIT(A) is not reasonable. Therefore, there is no justification to sent back the issue to the Assessing Officer for verification. 7. We have considered the rival submissions and perused the relevant material on record. It is observed that in the computation of its total income, the assessee-company had suomotu made a disallowance under section 14A to the extent of 5% of the exempt dividend earned and there being no interest expenses incurred by the assessee in relation to earning of the exempt dividend income as the investment in the relevant shares was made by the assessee out of its own funds as is clearly evident from the balance sheet of the assessee as on 31.3.2006, we agree with the contention of the learned Counsel for the assessee that the disallowance made by the assessee under section 14A to the extent of 5% of the exempt dividend income itself was reasonable as held by the Coordinate Bench of this Tribunal in several cases. Moreover, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Set off business loss (64,37,853) (64,37,853) 5. Net share trading income 11,10,75,945 11,13,31,662 Tax @ 30% (88E claim) *3,33,22,783 3,33,99,498 *Deduction restricted to tax payable = 3,33,11,220 Table 1 : Total expenses Sr. No. Particulars Amount (R) 1. Expenses as per profit and loss account 1,60,62,888 2. Less: Donation, interest, STT paid and depreciation difference. (16,27,445) 3. Less : Expenses towards dividend income (4,73,999) 4. Less: Expenses related to other income (Refer table 2) (95,22,087) 5. Net expenses 44,39,357 6. Expenses allocated to share trading income (92.13% of Sr. No.5 being proportion of share trading income to total income 40,89,798" 9.1. According to the Assessing Officer, the basis adopted by the assessee to allocate the expenses at ₹ 40,89,798/- was not reasonable. He also noted that the said allocation was done without taking into account the expenses that were related to earning of exempt income. He, therefore, recomputed the rebate allowable to the assessee under section 88E as under : "Speculation Profit as per return 12,16,03,597 # The total expenditure as per balance sheet is 160,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of determination of the eligible income on which rebate under section 88E is required to be calculated is not justified for the obvious reason that such income had been earned on shares/securities which had been trade during the year and not only on shares/securities held as stock in trade on the last date of the year. I therefore hold the that basis of allocation of expenditure allocate by the Assessing Officer is not justified. The Assessing Officer is directed to determine the amount of rebate u/s. 88E by allocating the expenditure for earning of income from eligible shares/securities transactions on the basis allocated by the assessee. The appeal on this ground is decided with directions as above. The appeal on this ground is allowed." 11. At the time of hearing before us, learned D.R. has relied on the Order of the Assessing Officer in support of Revenue's case on this issue. While the learned Counsel for the assessee has strongly supported the impugned order of the learned CIT(A) giving relief to the assessee on this issue. He also submitted that rebate claimed by the assessee under section 88E in assessment year 2006-2007 on the same basis as adopted in assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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