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TMI Blog2016 (5) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Member. This appeal of assessee is directed against the order of ld. CIT(A) 6, Ahmedabad in appeal no.CIT(A)-VI/ITO/Wd-1(3)/160/10-11. Assessment u/s 143(3) of the IT Act, 1961 (in short the Act) was framed on 14.12.2010 for Asst. Year 2008-09 by ITO, Wd-1(3), Ahmedabad. Grounds of appeal raised by assessee are as under :- 1. That on facts and in law the ld. CIT(A) has grievously erred in confirming the disallowance of ₹ 19,67,261/- made u/s 14A of the Act. 2. The appellant craves leave to add, alter, amend any ground of appeal. 2. From going through the file, we observe that assessee has filed the appeal late by 62 days. On being asked about the reason for delay in filing the appeal, ld. AR submitted that after receiving the order from ld. CIT(A) assessee had to move urgently to his native place in Uttar Pradesh due to ill health of his mother and other family problems. Last date for filing the appeal was 29.11.2012 whereas assessee returned from his native place on 3rd week of January, 2012 due to which this delay occurred and ld. AR also placed on record an affidavit signed by the person on behalf of the assessee. 3. After considering the submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resulting in exempt income therefore disallowance under section 14 A on account of interest and other expenses are necessary. Coming to the method of computation of disallowance under section U A, assessing officer disallowed expenses relatable to exempt income as per rule 8D which is mandatory from assessment year 2008-09. For interest, proportionate expense is disallowable whereas for other expenses ,5% of average investment value is disallowable. Considering the foci that appellant claimed huge .administrative and other expenses, the disallowance of administrative expenses made by the assessing officer @.5% of investment resulting in exempt income is as per .the formula given in rule 8D which is mandatory for making disallowance. In view of this the addition @ .5% of investment resulting in exempt income made by the assessing officer is confirmed, As regards interest, appellant had borrowed funds on which -interest was paid. While making investments, both borrowed funds as well as own funds were used hence one cannot say that borrowed funds were used only for business purpose and owned capital was only used for investment. Admittedly no separate accounts are maintained for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee is engaged in the business of trading of shares and securities. From going through the decision of the co-ordinate bench referred and relied on by ld. AR in the case of M/s K. Ratanchand Co. vs. ITO (supra), we find that the issue raised in the appeal before us is fully covered by the decision of the co-ordinate bench wherein similar issues came up before the Tribunal and it has been have held that in such cases disallowance u/s 14A should not exceed exempt income earned by the assessee. While deciding so co-ordinate bench has observed as under :- 6. We have heard rival contentions and gone through the facts and circumstances of the case as well as available records including Paper Book and case laws relied by the ld. AR. Addition of ₹ 4,04,204/- has been made by the AO against dividend income of ₹ 58,963/-. Nothing contrary has been brought to the fact that assessee is a dealer in shares and profit in share business has been shown by the assessee under the head income from business . A.O. has not made any specific finding to support the disallowance made by him. Further in case of Zaveri Virjibhai Mandalia vs. ACIT in ITA No.469/Ahd/2007 for AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of ₹ 900/-. The Assessing Officer was of the opinion that expenditure incurred for earning the exempt dividend income was not allowable to the assessee and the assessee has not disallowed any expenditure towards the earning of the exempted dividend income, he by invoking the provisions of Section 14A computed expenditure attributable to the earning of exempt dividend income under Rule 8D of the Income-tax Rules and made disallowance for interest expenditure of ₹ 1,49,710/- and administrative expenses of ₹ 12,750/-. The assessee unsuccessfully appealed before the CIT(A). The contention of the assessee is that the interest free funds available with the assessee in the form of share capital and free reserves as on the date of balancesheet was ₹ 17,86,69,501/- and the investments at the end of the year was at ₹ 1,26,00,538/- only. Therefore, in view of the decision of the Hon ble Gujarat High Court in the case of Hitachi Home and Life Solutions (I) Ltd. (supra) and Torrent Power Ltd. (Supra), no disallowance towards interest expenditure incurred for earning exempt income can be made. Regarding the disallowance of administrative expenses of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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