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TMI Blog2017 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act, 1961, r.w. clauses (ii) & (iii) of Rule 8D and whether it is in consonance with CBDT circular 5/2014 dated 11.02.2014. (ii) Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in appreciating the fact that in computation of Income, the assessee has quoted expenses of Rs. 99389/- as 'Management Fees' instead of 'disallowance of interest Expenses' for earning exempt income." 2. At the outset, the ld. AR submitted that the issue is squarely covered by the recent decision of Hon'ble Supreme Court in case of Godrej & Boyce Manufacturing Company Ltd. v. DCIT [2017] 81 taxmann.com 111 as well as the decision passed by Hon'ble ITAT Jaipur Benches in assessee's own case for A.Y. 2011-12 & 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earning of the dividend income in question. In the appeals arising out of the assessments made for some of the assessment years the aforesaid question was specifically looked into from the standpoint of the requirements of the provisions of sub-section (2) and (3) of Section 14A of the Act which has been then been brought into force. It is on such consideration that findings have been recorded that the expenditure in question bore no relation to the earning of the dividend income and hence the assessee was entitled to the benefit of full exemption claimed on account of dividend income. 37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-03. Sub-section (2) and (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome received. That any part of the borrowings of the assessee had been diverted to earn tax free income despite the availability of surplus or interest free funds available (Rs. 270.51 crores as on 1.4.2001 and Rs. 280.64 crores as on 31.3.2002) remains unproved by any material whatsoever. While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang v. Commissioner of Income-Tax [1992] 193 ITR (SC) 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act and in accordance with rule 8D of Income Tax Rules, 1961 if the AO having regarding to the accounts, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to such exempt income, is empowered for making disallowance as per rule 8D. In the case in hand, no finding is recorded by the AO in this regard. On the contrary, the ld. CIT(A) has given a finding after examining the accounts of the assessee. The AO has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which do not form part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A. What is relevant to examine is whether any expenditure sought to be disallowed had actually been incurred in earning the dividend income. The AO has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which do not form part of the total income. No reasonable nexus between the expenditure disallowed and the dividend income received has been established by the AO. 7. It is equally relevant to note that out of Rs. 30.82 crores worth of investments in subsidiary/associate concerns, an amount of Rs. 6.50 lacs has been invested during the year out of company's own funds and the rest all investments have been made in the earlier years wherein the AO has not established any reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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