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TMI Blog2019 (7) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... In such a scenario, the explanation offered by the assessee of no expenditure incurred appears to be in congruity with the market practice. Accordingly, we do not find it a fit case for resorting to double disallowance of the similar expenditure in the garb of Rule 8D(2)(iii) of the IT Rules. In consonance with the view also taken on the subject, we find merit in the plea taken by the assessee for deletion of disallowance. The order of the CIT(A) is thus set-aside and the AO is directed to delete the disallowance made towards administrative expenses under s. 14A r.w.r 8D(2)(iii) of the Rules - cross objection of the assessee is allowed. - Cross Objection No. 223/Ahd/2015 In I.T.A. No. 3166/Ahd/2015 - - - Dated:- 29-7-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of ₹ 1,04,27,249/- on various investments held by the assessee. The Ld. AR submitted that the AO invoked Rule 8D of the I.T. Rules, 1962 for the purposes of disallowance expenses under s. 14A of the Act as attributable to such investments. The disallowance of ₹ 14,25,225/- was made out of interest expenses as per Rule 8D(2)(ii) and ₹ 10,81,692/- was made towards administrative expenses as per the estimations provided under Rule 8D(2)(iii) of the I.T. Rules. The disallowance of interest expenses of ₹ 14,25,225/- was deleted by the CIT(A) but, however, the disallowance of estimated administrative expenses of ₹ 10,81,692/- has been retained. The assessee is aggrieved by the action of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of administrative expenses in terms of Rule 8D(2)(iii) by resorting to sec. 14A of the Act. As noted earlier the assessee has generated tax free income of ₹ 1,04,27,249/- from investments in mutual funds. The Revenue has inter alia disallowed 10,81,692/- towards administrative expenses as quantified in terms of formula prescribed under Rule 8D(2)(iii) of the Rules. The quantum of disallowance made by the AO and confirmed by the CIT(A) towards administrative expenses has been controverted in the present Cross Objection. We straightway notice that exempt income is out of investments in mutual funds. The Co-ordinate Bench in Academy for Computer Training (Guj.) Pvt. Ltd. vs. DCIT in ITA No. 3065/Ahd/2013 order dated 30.11.2016 has tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(iii) of the IT Rules. It will be pertinent to note that a bare reading of section 14A of the Act suggests that its applicability is not automatic. It is hedged by conditions prescribed therein. Section 14A inheres in it the concept of reasonableness. The formidable amount of expenditure as computed by the AO cannot be said to be attributable to tax-free income by applying a straight jacket formula as per Rule 8D(2)(iii) of the IT Rules in the given facts. Thus, we find considerable merit in the plea of the assessee. Hence, we are disposed to adjudicate the issue in favour of the assessee. Thus, order of the CIT(A) sustaining the disallowance section 14A deserves to be vacated. 5. In consonance with the view also taken on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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