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TMI Blog2021 (7) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... tice, we hereby remit the entire matter back to the file of the Ld. AO thereby providing an opportunity to the assessee to compute the actual expenditure incurred by it for making investment which earns exempt income. Needless to mention that any income/loss derived from any commercial/investment activity is not directly proportional to the expenditure incurred on such commercial/investment activity. We have remitted the matter back to the file of Ld.AO, We also hereby directed the assessee to promptly co-operate before the Ld. Revenue Authorities by furnishing the above stated statement of actual expenditure incurred by it for making investment which earns exempt income in order to expedite the proceedings of the Ld. Revenue Authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 24,35,222/- as the assessee company had made investment in various Mutual Funds earning exempt dividend income aggregating to ₹ 3,64,66,440/- by relying on the various decisions of Higher Judiciary cited in the Order. On appeal, the Ld. CIT (A) partially confirmed the order of the Ld. AO by observing as under:- 4. The appellant company has claimed exemption of dividend income of ₹ 3,64,66,440/- and no expenditure was allowed by the appellant for earning the same exempt income. With regard to the disallowance of expenditure U/s. 14A r.w.r 8D of the Act, the AR contended before the AO that it had owned capital and reserves sufficient for making the said investments. Rejecting the claim of the appellant, the AO made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er). The few transactions do not involve much time and only one of the finance persons dealt with them and time spent is also very small. Therefore, the AO is not justified in disallowing ₹ 17,89,428/- under rule 8D(2)(iii). 4.4. I have considered the issue and the submissions made by the AR. The provisions of Rule 8D(2)(iii) provide for the disallowance of expenditure relatable to administration and establishment expenses. Since it would not be practicable to precisely arrive at the expenditure incurred for earning the said exempt income on the basis of time / effort devoted by the administration / establishment, the said Rule stipulated 0.5% of the average value of investment, as appearing in the balance sheet on the first day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee he is authorised to invoke the provisions of Rule 8D of the IT Rules, 1962. In the case of the assessee such exercise is lacking. Factually it is also obvious that the assessee would have definitely incurred some expenditure towards investments made, which earns exempt income, such as:- (i) Interest on interest bearing funds that is utilised for the purpose of making such investment. (ii) Direct and indirect expenses attributable to the process of making such investment such as expenditure incurred for due diligence, managerial expenditure, clerical expense, stationary expenditure and portfolio management expenditure etc.. 6. Therefore, in the interest of justice, we hereby remit the entire matter back to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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