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TMI Blog2016 (4) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... is not satisfied with the correctness of the claim of the assessee in respect of expenditure in respect of exempt income, the AO cannot invoke Rule 8D to compute the said disallowance under the said Rule. Therefore, we find substance in the argument of the ld. AR and so, we find that without recording satisfaction as envisaged by the statute before invoking the computation provided for under Rule 8D has vitiated the impugned order. Therefore, we direct deletion of the addition made by the AO and which was sustained by the CIT (A) in his impugned order. - Decided in favour of assessee - ITA No.6291/Del./2013 - - - Dated:- 11-3-2016 - SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER For The Assessee : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. I find that the appellant has investment of ₹ 3,85,88,317.42 as on 31.3.2010 in its balance sheet. The appellant has incurred direct interest expenses of ₹ 2,35,16,7801- The AO has applied Rule 80. The Hon'ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT [2010] 328 ITR 81 (Bom) has held that the AO is duty bound to make the disallowance where the assessee has made investment income from which is exempt from tax. Similarly, Hon'ble Mumbai ITAT in the case of Stream International Services P. Ltd. v ACIT [2013] 023 ITR (Trib.) 0070 has held that the disallowance u/s 14A is to be made even if no exempt income is realized. The contention of the appellant that the appellant has made investment in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further submitted that only expenditure which has been proved to have been incurred in relation to the earning of tax-free income can be disallowed and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning of tax free income. The word incurred refers to the actual spending of the expenditure in relation to the exempt income and does not refer to deemed spending or assumed spending for the purpose. Ld. AR submitted that the AO completely ignored the submissions of the assessee and without recording any satisfaction, straight away applied the provisions of Rule 8D of the Rules and made the disallowance. Ld. AR further submitted that in any case, the disallowance u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as upheld the addition made by the AO by stating that the assessee had incurred direct interest expenses of ₹ 2,35,16,782/- and observed that the AO is duty bound to make the disallowance where the assessee had made investment to earn exempt income. The ld. AR pointed out that a perusal of paper book page 18 would reveal that administrative expenses for the company is only ₹ 2,10,245/- and that includes ITA 5 No.6291/Del./2013 salary component of ₹ 1,20,000/- which is the only expenditure which can be said to be incurred for the year under consideration from which 50% and DMAT expenses has been taken to arrive at ₹ 61,666/-. The Hon'ble jurisdictional High Court in the case of CIT vs. Taikisha Engineering India L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompute the deduction under Rule 80D of the Rules. This precondition and stipulation as noticed below is also mandated in sub Rule (1) to Rule 80 of the Rules. After going through the other cases also, relied upon by the ld. AR, we find that the AD has not recorded the satisfaction envisaged by the statute before invoking the computation provided for under Rule 8D, which vitiates the impugned order. We also find that in assessee's own case for the previous year also, the Tribunal has deleted the addition made by the AD on this account. Therefore, we uphold the order of the CIT (A) on this issue. This ground of revenue's appeal is dismissed. We find that the assessee has earned exempt income to the tune of ₹ 17,56,369/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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