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TMI Blog2013 (11) TMI 1702X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to make disallowance under section 1 4A as per decision of ITAT Mumbai Bench in the case of DCIT Vs. HDFC BANK Ltd, 217/ Mum! 2008 when disallowance for this year has to made as per the provisions of rule 8D in accordance with the decision of Mumbai High Court in the case of Godrej and Boyce Manufacturing Company Ltd. 234CTR 1." ii) "Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) is justified in directing the Assessing Officer to make disallowance under section 1 4A as per decision of ITAT Mumbai bench in the case of DCIT Vs. HDFC Bank Ltd. 217/ mum! 2008 when Learned CIT (A) could not find any error in the computation of disallowance made as per rule 8D by the Assessing Officer." 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup India Pvt. Ltd. Vs ACIT in ITA No. 267//2012 dated 23.3.2012. The Ld. A.R has referred the schedule 14 to the balance sheet and submitted that the total administrative expenditure booked by the assessee to the profit and loss account is ₹ 19 lacs whereas the A.O disallowed 27,68,708/-. Thus, the Ld. A.R has submitted that the disallowance u/s 14A cannot be more than the actual expenditure booked to the profit and loss account. Further the said expenditure has been incurred for the entire business activities of the assessee and therefore, the expenditure which has been incurred in relation to earning exempt income can be disallowed. 4. We have considered the rival submissions as well as relevant material on record. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to earn the exempt income against the taxable income. Thus, the expenses incurred to earn exempt income cannot be allowed and only the expenses relatable to the earning of taxable income shall be allowed. If there is expenditure directly or indirectly incurred in relation to the exempt income the same cannot be allowed against the income which is taxable. Thus, for attracting the provision of Section 14A there should be proximate cause for disallowance which has relationship with the tax exempt income. The apportionment of expenditure is needed when expenditure is incurred in relation to composite/indivisible business which results the earning of both taxable and non-taxable income. Therefore in order to disallowed the expenditure u/s 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive nexus for earning the exempt income. Accordingly, we hold that the disallowance of indirect expenses by applying Rule 8D is not justified as there is no direct nexus between the expenditure and the exempt income which is prerequisite for applying Section 14A. Even otherwise the Rule 8D can be invoked only when Section 14A is attracted and not otherwise. The scheme and purpose of Section 14A is to disallow the claim of the expenses incurred in relation to earning the income not forming part of the total income. Therefore, the disallowance of expenditure is always in relation to the claim of expenditure and it cannot be more than the claim itself. An identical issue has been considered by the Delhi Benches of the Tribunal in case of Gille ..... X X X X Extracts X X X X X X X X Extracts X X X X
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