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TMI Blog2021 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the accounts of the assessee, as to why the latter claim that no expenditure was attributable to earning of the exempt dividend income was not to be accepted. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain, hence, on this investment, the disallowance u/s 14A of the Act read with Rule 8D of the Rules is uncalled for. Under these options no dividend is declared, the income attributable to the units under these options remain invested in funds. The growth funds generate income only in the form of capital gains/losses that accrue on sale/redemption of units of such funds. Therefore, the AO is directed rework the average value of investment for the purpose of computing the disallowances per Rule 8D(2)(iii) after excluding the investment in IDFC Super Saver Income Fund-Growth Plan." 5. Before us, the Ld. counsel for the assessee refers to the order of the Tribunal in assessee's own case for AY 2005-06 (ITA No. 5079/Mum/2012) and AY 2010-11 (ITA No. 5758/Mum/2015) and AY 2011-12 (ITA No. 5759/Mum/2015). Explaining that the disallowance of ₹ 7,71,048/- made by the AO u/s 14A r.w.r. 8D is incorrect, the Ld. counsel elaborates that the AO has made the disallowance as mere routine , without going into the merits of the written submission filed by the assessee as to why the disallowance is not applicable ; investments made by the Company are long term in nature; the Company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for AY 2010-11, the Tribunal has held that: "6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the assessee had during the year under consideration earned a dividend income of ₹ 11,67,933/- on exempt income yielding investments of ₹ 7,12,52,078/-. The assessee had not attributed any part of the expenses as having been incurred for earning of the aforesaid exempt income. On a query by the A.O as to why the disallowance under Sec.14A may not be made in respect of the exempt dividend income, it was submitted by the assessee that as it had not incurred any expense other than demat charges, hence no disallowance under Sec.14A was called for in its hands. We find that the A.O had dislodged the claim of the assessee that no expense was attributable to earning of the exempt dividend income, merely on the basis of an observation that it was beyond comprehension that no part of the expenses aggregating to ₹ 2,50,32,263/- debited by the assessee in its profit and loss account could be related to earning of the exempt dividend income by the assessee. 7. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us, the claim of the assessee that no disallowance under Sec.14A was called for in its case had been dislodged by the A.O, not on the ground that having regard to the accounts of the assessee, as placed before him, it was not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee that no expenditure was incurred for earning of the exempt dividend income, but rather the same was not accepted for the reason that as per the A.O it was beyond comprehension that no expense debited by the assessee in the profit & loss account could be related to earning of the exempt dividend income by the assessee. We have deliberated on the aforesaid observations of the A.O and are unable to persuade ourselves to subscribe to the same. We are of the considered view that as the A.O while dislodging the claim of the assessee, that no expense was attributable to earning of the exempt dividend income had failed to comply with the statutory requirement of arriving at a satisfaction having regard to the accounts of the assessee, as placed before him, that it was not possible to generate the requisite satisfaction with regard to the correctness of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatable to earning of the exempt dividend income ought to have made a mention of the expenses which were booked by the assessee in its books account, and in the backdrop of the same should have pointed out that the incurring of the same had an inextricable nexus with the earning of the exempt dividend income. We thus, are of considered view that as observed by us in the case of the assessee for the immediately preceding year, viz. A.Y 2010-11, in the year under consideration also the A.O while dislodging the claim of the assessee that no disallowance was called for in its hands under Sec. 14A, had failed to generate the requisite satisfaction with regard to the correctness of the said claim of the assessee. We thus, are of the considered view that as the disallowance made by the A.O Under Sec. 14A r.w Rue 8D is not as per the mandate of the judgment of the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Vs. DCIT and Anr. (2017) 394 ITR 449 (SC), hence the same cannot be sustained and is liable to be vacated. The order passed by the CIT(A) in context of the issue under consideration is set aside and the disallowance under Sec. 14A r.w Rule 8D of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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