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TMI Blog2016 (5) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... but not switching out from one fund to another in order to optimum benefit to the assessee. In the given situation where the assessee has himself added a sum of ₹ 11,71,455/- to its total income in relation to expenditure incurred for earning exempt income then there remains no reason to sustain the addition of ₹ 8,84,542/- as made by ld. Assessing Officer under the provisions of section 14A of the Act. We therefore, delete the same - Decided in favour of assessee - ITA No. 2738/Ahd/2011 - - - Dated:- 4-4-2016 - Shri Rajpal Yadav, JM, Shri Manish Borad, AM. For The Appellant : Shri Mehul R. Shah, AR For The Respondent : Mr. James Kurein, Sr.DR ORDER PER Manish Borad, Accountant Member. This appeal of the assessee is directed against the order of ld. CIT(A)-1, Surat in appeal No.CAS-1/91/2010-11, dated 15.9.2011. Assessment was framed by DCIT Circle-1, Surat for Asst. Year 2008- 09 on 31.3.2010 u/s 143(3) of the IT Act, 1961 (in short the Act). Assessee has raised following grounds of appeal :- 1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which comprises of Portfolio management services fees and custodian charges in its computation of income and STT charges of ₹ 69,482/- as expenses in relation to exempt income. However, Assessing Officer was not satisfied with the explanation of the assessee nor did the Assessing Officer consider the expenses already disallowed in the computation of income and as per his findings given at para no. 5 of assessment order he calculated ₹ 8,84,542/- as expenditure in relation to exempt income under Rule 8D(iii) and added the same to the total income of assessee. Ld. AR also submitted that assessing officer has erred in making disallowance u/s 14A of the Act. The assessing officer has failed to properly appreciate the explanation given during the course of assessment proceedings. The dividend amounting to ₹ 4,30,64,998/- is credited by assessee which is mostly received through ECS or automatically reinvested under dividend reinvestment option and both of which possibly do not require any human efforts. It is pertinent to mention here that the investment in shares and mutual fund has been made by assessee out of its own funds and thus, no cost is associated in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the records that any expenditure in relation to such income has been added back by assessee to its total income and accordingly he went ahead to determine the amount of expenditure in relation to dividend income which does not form part of any method under rule 8D of IT Rules, 1962 and calculated ₹ 8,84,542/- as disallowance u/s 14A of the Act. Section 14A of the Act rule 8D of IT Rules read as under :- Sec. 14A. Expenditure incurred in relation to income not includible in total income.-(1)For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. C = The average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. The term Total Assets means total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets. (c) An amount equal to % of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. In our view, Rule 8D comes into operation where the Assessing Officer is not satisfied in relation to income which does not form part of the total income under this Act and thereafter if the Assessing Officer is unable to determine the amount of such expenditure incurred in relation to the income which does not form part of the total income then he may resort to the method with prescribed in Rule 8D of the IT Rules, 1962 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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