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TMI Blog2018 (1) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the CIT(A) reveals that the assessee on the contrary had agreed before him that the same were the direct expenses incurred in relation to its exempt income. We thus are of the considered view that in the backdrop of the aforesaid concession of the assessee, the grievance of the assessee as regards the sustaining of the disallowance by the CIT(A) does not survive. - Decided against assessee. Restoring the disallowance u/s 14A(2) r.w. Rule 8D(2)(iii) to the file of the A.O for fresh adjudication - Held that:- Held that:- CIT(A) keeping in view the claim of the assessee that the administrative expenses to the extent of ₹ 13,53,850/- were not incurred in relation to earning of exempt income, and no expense was incurred for earning of the exempt income, had thus rightly directed the A.O to make necessary verifications as regards the said claim of the assessee and readjudicate the disallowance under Sec. 14A r.w Rule 8D(2)(iii). We are of the considered view that no infirmity emerges from the aforesaid observations of the CIT(A). We thus finding no reason to dislodge the view arrived at by the CIT(A), therefore, uphold the same. - Decided against revenue - I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 20.01.2011, disclosing a loss of ₹ 11,62,57,458/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2). 3. The A.O observed during the course of the assessment proceedings that though the assessee had received dividend income of ₹ 5,46,27,122/- from its exempt income yielding investments in shares, however, no expenditure was apportioned and offered as a disallowance towards earning of the said exempt income. The A.O being of the view that some expenses had to be appropriated towards earning of the exempt income, therefore, applied the provisions of Sec. 14A r.w. Rule 8D and made a disallowance of ₹ 4,20,64,448/- in the hands of the assessee, as under: DETERMINING AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AGGREGATE OF THE FOLLOWING AMOUNTS i. The amount of expenditure directly relating to income which does not form part of total income ₹ 93,692 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O had correctly invoked the provisions of Section 14A(2) r.w. Rule 8D(2)(ii) and disallowed a proportionate amount of ₹ 44,63,736/- in respect of the interest expenses incurred on earning of the exempt income. The CIT(A) further observed that as the demat charges of ₹ 93,692/- were clearly in respect of earning of exempt dividend income by the assessee, therefore, the same were rightly disallowed by the A.O under Sec.14A(2) r.w. Rule 8D(i). 5. That as regards the disallowance under Sec. 14A(2) r.w. Rule 8D(2)(iii) of ₹ 3,75,07,020/- the CIT(A) observed that it was submitted by the assessee that the administrative expenses of ₹ 13,53,850/- incurred were not related to earning of exempt income. The CIT(A) in the backdrop of the aforesaid facts directed the A.O to verify the authenticity of the claim of the assessee and verify as to whether the aforesaid administrative expenses were wholly and exclusively incurred by the assessee for its business of trading in fabric, or not. The CIT(A) further observed that in case if the aforesaid expenses were found to be indivisible, i.e incurred for earning both the taxable and non-taxable income, then only propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 4014/Mum/2013, dated 02.03.2016) and are unable to persuade ourselves to be in agreement with the claim of the ld. A.R that the issues involved in the present appeal are squarely covered by the aforesaid order of the Tribunal. We find that in the aforesaid case the indulgence of the Tribunal was sought to adjudicate the validity of the mechanical disallowance made by the A.O under Sec. 14A(2) r.w Rule 8D(2)(iii) of ₹ 3.12 crores, loosing sight of the total expenses of ₹ 4.14 lakhs incurred by the assessee. The Tribunal while disposing of the aforesaid appeal of the assessee had observed as under: We f ind that the AO made a disallowance of ₹ 3.12 crores as against the total expenses of ₹ 4.14 lakhs incurred by the assessee, that the AO had not given any reason or basis for disallowing the said amount, that the AO and the FAA had mechanically applied provisions of Rule 8D.Disallowance u/s.14A could he made if the assessee claimed some expenditure against the exempt income. The reason behind the section 14A and Rule 8D is to deny double benef it to the assessee i.e. claiming exemption on one hand and claiming expenditure on the other. But it was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) , the A.O prior to arriving at the aforesaid conclusion, ought to have verified the availability of the owned funds with the assessee. We thus restore the issue pertaining to disallowance made by the A.O under Sec. 14A(2) r.w Rule 8D(2)(ii) to the file of the A.O for fresh adjudication. The A.O is directed to readjudicate the issue as regards the disallowance under Sec. 14A r.w Rule 8D(2)(ii) keeping in view the judgment of the Hon‟ble High Court of Bombay in the case of HDFC Bank Ltd. (supra). The Ground of appeal No. 1(ii)(b) (c) are allowed for statistical purposes. 9. We now take up the claim of the assessee that the CIT(A) had erred in sustaining the disallowance made by the A.O under Sec. 14A r.w Rule 8D(2)(i) in respect of the demat charges of ₹ 93,692/-. We find that though the assessee had assailed before us the validity of the disallowance of the demat charges of ₹ 93,692/- made by the A.O, but however, a perusal of the order of the CIT(A) reveals that the assessee on the contrary had agreed before him that the same were the direct expenses incurred in relation to its exempt income. We thus are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Sec. 14A(2) r.w. Rule 8D(2)(iii) was highly pitched, had thus restored the matter to the file of the A.O for making necessary verifications. We find that the CIT(A) while restoring the matter to the file of the A.O had directed him to verify the veracity of the claim of the assessee that expenses to the extent of ₹ 13,53,850/- were not related to earning of exempt income and were incurred wholly and exclusively for its business of trading in fabric. We further find that the CIT(A) had directed the A.O that in case the expenses were found to have been incurred by the assessee for earning of both the taxable and exempt income and the nature of expenses is indivisible, then only proportionate amount of the related expenses were to be disallowed. We have given a thoughtful consideration to the aforesaid observations of the CIT(A). We are of the considered view that the CIT(A) keeping in view the claim of the assessee that the administrative expenses to the extent of ₹ 13,53,850/- were not incurred in relation to earning of exempt income, and no expense was incurred for earning of the exempt income, had thus rightly directed the A.O to make necessary verifications as rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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