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TMI Blog2018 (5) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed as exempt. Therefore, the disallowance worked out under Rule 8D(iii) being administrative expenditure is restricted to the amount of dividend earned. AO is directed to modify accordingly. Ground is partly allowed. - I.T.A. No. 1926/HYD/2017 - - - Dated:- 11-5-2018 - SHRI D. MANMOHAN, VICE PRESIDENT And SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For Assessee: Shri V. Siva Kumar, AR For Revenue: Shri B. Suresh Babu, DR ORDER PER B. RAMAKOTAIAH, A.M.: This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-3, Hyderabad, dated 21-09-2017 on the issue of disallowance u/s. 14A of the Income Tax Act [Act]. 2. Briefly stated, assessee-company is engaged in the business of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investments was considered for disallowance by the Assessing Officer and added to the total income of the appellant in terms of Rule 8D(2)(iii) of the Income Tax Rules, 1962. Further, for the provisions of Section 115JB, book profit means net profit as shown in the P L account for the relevant previous year a s increased by the amounts referred to in clauses (a) to (i) below Explanation-l to Sub-Section (2) and has reduced by the amounts referred to in clauses (i) to (viii) below Explanation-1 to Sub-Section (2) of Section 115JB of the Income Tax Act. The adjustment to book profit in clause (f) to the Explanation-l below Sub- Section (2) of Section 115JB reads as under: The amount or amounts of expenditure relatable to any income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rojects Investments Pvt. Ltd., Vs. ACIT ITAT, Hyderabad, dated 28-02-2017 (SMC); f. Avshesh Mercantile (P) Ltd., Vs. DCIT [26 taxmann.com 43 (Mumbai)/(2012) 54 SOT 19]; g. CIT Vs. Oriental Structural Engineers P. Ltd., [35 taxmann.com 210 (Delhi-HC); h. CIT Vs. Holcim India (P) Ltd., [57 taxmann.com 28) (D elhi)]; i. M/s. Kamadhenu Sukrit Pvt. Ltd., Vs. ITO, ITAT Hyderabad Bench, dated 22-11-2017; 5. Ld. DR, however, relied on the orders of the CIT(A) . 6. We have considered the rival contentions and peruse d the facts on record and the case law relied upon. As seen from the order of the AO as well as the CIT(A), there is no fin ding that assessee has incurred any expenditure for earning the said dividend income. There w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng dividend income. AO without giving any satisfactory reason, just invoked Rule 8D(iii) and disallowed the amount. 9. The Co-ordinate Bench in the case of Sahara India Financial Corpn. Ltd., Vs. DCIT (supra) has held in para 81 as under: We have heard the rival contentions and perused the material available on record. It has not been disputed that the administration, expenses and books of account of investment division are separately carried out and maintained by the assessee. No infirmity has been found by the department in this behalf. One of the main issue is on whom lies the onus to establish nexus of available funds with free and taxable income. Similarly courts have held that a finding in objective terms about assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able expenditure less than the exempt income can be disallowed. In our considered opinion, in the interest of justice, it will be reasonable to estimate and disallow, 50% of exempt) income (Rs.68,37,583/-) as relatable to exempt income u/s 14A r/w rule 8D. We do not go into various plea taken by both sides offering diverse views based on judicial citations. This ground of the assessee is partly allowed . 10. Respectfully following the above principles, as the disallowance made by AO has resulted in absurd situation of disallowing genuine other business expenditure, on which assessee earned more than ₹ 19 Lakhs income (as against ₹ 8,100/- of dividend), I am satisfied that the disallowance u/s. 14A should be restricted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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