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TMI Blog2017 (2) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend income only from four companies from the investments made in the previous year but not in the current assessment year. Therefore, even assuming that there should be some expenditure which could have been incurred by the assessee in earning exempt income in the circumstances of the present case disallowing ₹ 70,00,000/- on adhoc basis out of total expenditure of ₹ 86,08,855/- debited to P&L a/c is totally unjustified. Therefore, we direct the A.O to disallow 20% of the expenditure debited to P&L a/c as the reasonable expenditure which can be said to be attributable for earning the dividend income. - Decided partly in favour of assessee. - I.T.A. No. 1270/Mum/2015 - - - Dated:- 17-1-2017 - Shri C. N. Prasad, JM And Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect nexus is proved to say that interest free funds were used for investment purpose. Therefore, he rejected the contention of assessee that entire investment was made out of interest free funds. He further observed that though Rule 8D is not applicable but looking to the quantum of investment and borrowed funds he thought that it is quite reasonable that if an amount of ₹ 70,00,000/- is treated as expenses incurred for earning dividend income of ₹ 36,90,56,836/-. 4. The assessee preferred appeal before the Ld. CIT(A) and the Ld. CIT(A) sustained the disallowance observing that the disallowance of ₹ 70,00,000/- appears to be quite reasonable if the proportionate quantum of huge exempt dividend income and the taxable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in respect to receipt as well as realization of cheque from the said companies. 7. The Ld. Counsel for the assessee further submits that there were no new investments during this assessment year but the investments on which dividend was earned during the current year was made in the previous year ending 31-03-2016. Therefore, he submits that assesseee has not incurred any expenditure to earn dividend income of ₹ 36.91 Crores except the D Mat charges of ₹ 3,39,184/- and some expenditure which are more of administrative out of statutory compulsion. The Ld. Counsel submits that the D Mat charges of ₹ 3,39,184/- were already disallowed by the assesse in its computation of income and therefore he submits that ad-hoc disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act which was confirmed by the Ld. CIT(A). Admittedly for this assessment year being assessment year 2007-08, the provisions of Rule 8D have no application. However, at the same time reasonable disallowance should be made towards expenditure for earning exempted income in view of the jurisdictional High Court decision in the case of Godrej Boys Ltd. The assessee contends that all the investments were made in group concerns, they are strategic investments and therefore the provisions of section 14A have no application. He also contended that the adhoc disallowance made was on high side and reasonable estimate may be made because did not income such huge expenditure the assesse that no expenditure is being incurred for earning such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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