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TMI Blog2020 (2) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... has restricted the disallowance towards administrative expenses under Rule 8D(2)(iii) to 0.5% of the assets which yielded exempt income during the year. In our opinion, the estimation of 0.5% of assets which yielded exempted income during the year would be a most reasonable estimate for identifying the administrative expenditure for earning the exempt income. We, accordingly, direct the Assessing Officer to compute the disallowance in view of our above direction, however, the disallowance, if any, computed in this manner should be restricted to disallowance of ₹ 23,55,952/-, which was made by the Assessing Officer in original assessment proceedings - Appeal of assessee is accordingly allowed for statistical purposes. - ITA No.4389/Del/2016 (Assessment Year: 2007-08) - - - Dated:- 17-1-2020 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER Appellant by: Shri Ajay Vohra, Sr. Advocate, Shri Neeraj K. Jain, Adv. Respondent by: Ms. Rakhi Vimal, Sr.DR ORDER PER O.P. KANT, AM: This appeal by the assessse is directed against the order dated 22.06.2016 passed by the learned Commissioner of Income Tax (Appeals), 22, New Delhi [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable opportunity to the assessee of being heard. In compliance to the direction of the Tribunal, the Assessing Officer allowed various opportunities to the assessee. Though initially no compliance was made by the assessee of the opportunity granted by the Assessing Officer vide his letter dated 23.07.2014 and 20.01.2015, however, at the end of the proceedings representative of the assessee attended and filed submission. He identified the expenses of ₹ 5,83,685/- by apportioning cost of running the treasury operations of the assessee for disallowance u/s 14A of the Act. The suo motu disallowances of ₹ 5,83,685/- proposed by the asessee was not accepted by the Assessing Officer and he proposed the disallowance in proportion of the exempt income to the total income plus exempt income. The ld. Assessing Officer arrived at the proportion of 1.68% which he applied over the interest expenses and administrative expenses and worked out disallowance of ₹ 1,01,656/- towards interest expenses indirectly attributable to earning of the exempt income and ₹ 1,80,87,686/- as administrative expenses attributable to exempt income. The computation of disallowance made in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no connection with the earning of exempt dividend income like contract manufacturing charges, training expenses, insurance rates and taxes, rent, etc. the method adopted for computation of disallowance by the AO is substituted by an estimated disallowance out of the exempt income earned. Therefore, the disallowance is confirmed at 5% of the dividend income earned of ₹ 7,49,47,159/- which comes to ₹ 37,47,358/- 3. Before us, the ld. counsel of the assessee field a paperbooks containing pages 1 to 118 and submitted that the ld. Assessing Officer has made disallowance even more than the amount which was disallowed in the original assessment proceedings. He submitted that the Assessing officer was not justified in computing the disallowance of administrative expenses in proportion of the exempt income. He submitted that even calculation made by the Assessing Officer is also not correct. He further submitted that there is no basis of estimation of 5% of the dividend income as expenses related to the exempt income by the ld. CIT(A). The ld. Counsel referred to page 41 of the paper-book wherein the basis of the suo motu disallowance made before the AO of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that it has worked out the disallowance of administrative expenses on scientific and reasonable manner. The working of the assessee available on page 41 of the paper-book is reproduced as under: Treasury Staff Staff Cost Whether involved in MF activity (Y/N) Estimated Time spent for MF Activity * Proportionate Expenses Treasurer Manager Executive Officer Officer 1,653,196 717,034 789,572 579,057 93,020 y y y y N 6.25% 6.25% 6.25% 18.75% NA 103,325 44,815 49,348 108,573 NA 3,831,879 306,061 Other Expenses Other Staff related expenses 2,070.021 Preparation Expense 214,515 Electricity Expense 27,505 Rent Expense 49,132 Profession and l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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