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TMI Blog2022 (2) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from Assessment Year 2008-09. Hence, the Assessing Officer erred in law by applying the Rule 8D of the Rules for disallowance. Therefore, looking to the quantum of investment, business of the assessee and material placed before us, we are of the considered view that it would sub-serve the interest of justice if the disallowance is restricted to a sum of ₹ 2,50,00,000/-. As it cannot be presumed that for handling, overseeing and making investment, no expenditure could be incurred. The assessee has failed to demonstrate how much administrative expenditure was incurred qua the investment that earned tax free income. Therefore, a fair estimation is made for such disallowance. The grounds raised by the assessee are partly allowed. - ITA No.7578/Del/2018 - - - Dated:- 10-2-2022 - Shri Kul Bharat, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Appellant : Sh. Ajay Vohra, Adv., Sh.Rohit Jain, Adv. Ms. Soumya Jain, CA For the Respondent : Ms. Sarita Kumar, CIT DR ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2007-08 is directed against the order of Ld. CIT(A)-6, Delhi dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions, there is no doubt that Rule 8D was not applicable during the year under consideration, however, the application of the provisions laid down under sec. 14A of the Act is justifiable when the Assessing Officer is not satisfied that there is proximate cause for disallowance, stating the relationship of expenditure with income which does not form part of the total income. In the present case, the Assessing Officer has simply applied procedure laid down in Rule 8D to compute the amount disallowable under sec. 14A of the Act. The contention of the assessee in the present case remained that it is an operating company engaged in manufacture of automobile. The entire expenditure incurred was in relation to the manufacturing operation of the assessee and the Assessing Officer failed to bring on record any evidence/material to demonstrate that any part of such expenditure was relatable to the exempt income. It was further contended that borrowed funds available with the assessee as a matter of fact were utilized for business operation and not used for making the investments. It was further contended that interest free own fund available with the assessee for exceeded the investment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction is not recorded, no disallowance can be sustained. He further submitted that the issue even otherwise is also covered by the decision of the Tribunal and the order of the Hon ble Delhi High Court pertaining to Assessment Year 2005-06 in assessee s own case. He drew our attention to the order of the Tribunal enclosed with the Paper Book. Further, he submitted that the Tribunal in Assessment Year 2006-07 in assessee s own case had restored the issue of disallowance u/s 14A of the Act to the assessing authority to decide in accordance with the judgement of Hon ble Delhi High Court in the case of Maxopp Investment Ltd. 347 ITR 272 (Del.). He contended that the assessing authority could have invoked the provisions of Rule 8D of the Income Tax Rules, 1962 only w.e.f Assessment Year 2008-09, but in the present case, the assessment is qua the Assessment Year 2007-08. 8. On the contrary, Ld. CIT DR vehemently opposed these submissions and supported the orders of the authorities below. 9. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that the Ld. CIT(A) has affirmed the view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main contention, should be restricted to some reasonable proportion of expenses incurred by the finance Department and an alternative computation has been prepared. The said disallowance has been prepared taking into consideration 5.5% of the total cost of the finance Department which comes to ₹ 60,58,237/-. The computation given by the appellant is reproduced below: CALCULATION OF AMOUNT OF DISALLOWANCE Particulars Amount Salaries cost 38,67,750 Proportionate Administrative costs relating to CFP Department 21,90,488 Total disallowance u/s 14A 60,58,237 CALCULATION OF AMOUNT OF DISALLWOANCE U/S 14a-ADMISNTRATIVE COSTS Total administrative cost of finance 3,98,27,048 %age of exp incurred for investment activity 5.50% Administrative cost allocated to investment activity 21.90,488 Workings Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. This approach of authority below is not justified. The law mandates and it is incumbent upon the Assessing Officer to make disallowance u/s 14A of the Act having regard to accounts of the assessee if he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. So far interest expenditure is concerned, the Ld.CIT(A) has given finding on fact that from the details submitted, it was seen that the opening and closing funds available, with the appellant assessee far exceeded the total average investment of ₹ 807.7 crores. This finding on fact is not assailed by the Revenue. However, the disallowance regarding administrative expenditure is under challenge before this Tribunal. Undisputedly, the Assessing Officer made disallowance by applying Rule 8D of the Rules, this Rule came into vogue with effect from Assessment Year 2008-09. Hence, the Assessing Officer erred in law by applying the Rule 8D of the Rules for disallowance. Therefore, looking to the quantum of investment, business of the assessee and material placed before us, we are of the considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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