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TMI Blog2022 (7) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Zee Entertainment Enterprises Ltd.[ 2017 (5) TMI 719 - ITAT MUMBAI] . The Ahmedabad in the case of Sun Pharmaceutical Industries Ltd. [ 2017 (6) TMI 1323 - ITAT AHMEDABAD] directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D. Thus we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in confirming disallowance in respect of administrative expenses as per the formula given under Rule 8D. - Assessee appeal is partly allowed. - ITA No. 1420/Ahd/2019 - - - Dated:- 15-7-2022 - Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Bandish Soparkar, A.R. For the Revenue : Shri S.S. Shukla, Sr. D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER: - This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10328/ITO Wd-3(1)(1)/17-18 vide order dated 03/07/2019 passed for the assessment year 2009-10. 2. The assessee has raised the following grounds of appeal:- 1. In law and in facts and circumstances of the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not qualify for disallowance under section 14A of the Act. The AO in his order further held that net interest expense of ₹ 65,88,474/- (₹ 27,83,07,877-interest expenses) minus ₹ 27,17,19,403/- (interest income) has to be considered for disallowing interest expense under section 14A of the Act. He further held that a sum of ₹ 1,11,52,075/- worked out at 0.5% of the average exempt assets of ₹ 23,04,14,963/-was not allowable under section 14A of the Act, as it is based on the binding formula as provided under section 14A of the Act. Accordingly, the Ld. Assessing Officer made the total disallowance of ₹ 15,28,320/- under section 14A of the Act. Aggrieved by the assessment order, the assessee filed appeal before Ld. CIT(A), who dismissed the appeal of the assessee with the following observations: 4.8 After considering the above-mentioned decision of the Hon'ble High Court of Gujarat, it is held that the A.O. did not make any error in interpreting and carrying out the reasoned directions given by the Hon'ble Tribunal and re-worked out the disallowance u/s 14A of the Act read with Rule 8D of the I.T. Rules which resulted in substantial r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Hitachi Home and Life Solutions (I) Ltd.[2014] 41 taxmann.com 540 (Gujarat) , the Gujarat High Court held that where assessee's interest free funds exceeded investment made for earning exempted dividend income, disallowance under section 14A was not justified. Again, in the case of UTI Bank Ltd[2018] 99 taxmann.com 392 (Gujarat) , the Gujarat High Court held that no disallowance could be made under section 14A where assessee's interest-free funds far exceeded its interest-free investments. In the case of Gujarat Narmada Valley Fertilizers Co. Ltd [2014] 42 taxmann.com 270 (Gujarat) , the Gujarat High Court held that where assessee-company received dividend on UTI and shares and investment in same was made in earlier years and interest free funds available with assessee were much larger as compared to investment, disallowance of assessee's claim for interest expenditure by applying section 14A was incorrect. In case of Gujarat Fluoro chemicals Ltd.[2020] 120 taxmann.com 433 (Gujarat) , the Gujarat High Court again reiterated that where interest free funds available with assessee were far more than gross investment, it could safely be harboured that interest b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 379 (Mumbai). The Ahmedabad in the case of Sun Pharmaceutical Industries Ltd.[2017] 84 taxmann.com 217 (Ahmedabad - Trib.) directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D. This issue again came up before the Mumbai ITAT in the case of Future Retail ITA 5959/Mum/2016 , wherein the Mumbai ITAT observed as under: We do not agree with the submission of ld. AR that assessee has not incurred any expenditure and not warranted to remit this issue back to AO. The investment does require constant monitoring even though it is made within the group concern . Sometimes the method applied as per rule 8D(2)(iii) gives absurd result like the disallowance is more than the actual administrative expenses. Therefore, we are directing AO to determine the total administrative expenses and also determine the total income earned by assessee including taxable and exempt income apply the ratio of income to determine the administrative expenses and can be apportioned to exempt income. Simultaneously calculate 0.5% of the investment as per rule 8D(2)(iii) of the Rule in applying the Rules he should consider only those invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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