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TMI Blog2022 (12) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... free funds available with assessee were far more than gross investment, it could safely be harboured that interest bearing funds was not invested by assessee and, thus, no disallowance under section 14A to be made. In view of the above, there is no reason for disallowance so far as proportionate interest expenditure is concerned. So far as administrative expenses is concerned, we observe that the assessee has itself disallowed a sum of ₹ 1.78 lakhs in its return of income, which as per the counsel is adequate to cover disallowance of administrative expenses. The Ahmedabad Tribunal in the case of Axis Bank Ltd. [ 2017 (3) TMI 1335 - ITAT AHMEDABAD] held that administrative expenses need to be disallowed under section 14A of the Act. The law is unanimous on the point that administrative expenses need to be disallowed as per Rule 8D.However, since in the instant facts, the assessee has suo moto disallowed a sum in its return of income while making disallowance under section 14A read with Rule 8D, no further disallowance is called for on account of administrative expenditure. Disallowance u/s 14A while computing income u/s 115 JB - The Karnataka High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant craves leave to add, alter, amend any ground of appeal. 3. Ground number 1 : The first ground relates to disallowance of ₹ 15,98,880/- u/s 14A of the Act. The brief facts in relation to this ground of appeal are that during the year under consideration, the assessee earned exempt income in the form of dividend income and share in the profit of the partnership firm. The assessing officer disallowed proportionate interest of ₹ 14,62,410/- on account of interest expenses and ₹ 1,36,470/- on account of administrative cost being 0.5% of average value of investment. 4. In appeal, Ld. CIT(Appeals) dismissed the assessee s appeal by relying upon the order passed by his predecessor for assessment year 2012- 13, with the following observations: Under the identical facts and circumstances, my predecessor has decided this issue against the appellant in AY 2012-13 vide order dated 28.08.2015 contained in Appeal No. CAB-1/302/14-15, relevant portion of which is reproduced as under: 6.3. I have considered the appellant's submission and the AO's observations. From the copy of accounts submitted by the appellant it is seen that the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to page 20 of the paper book to point out that no fresh investment was made during the year under consideration. Therefore, the assessee s main contention is that since the assessee s own capital far exceeds the investment in funds bearing exempt income, coupled with the fact that no fresh investments were made during the year under consideration, there is no case for disallowance so far as the disallowance relatable to interest expenditure is concerned. Further, regarding the disallowance so far as administrative expenditure is concerned, the counsel for the assessee submitted that the assessee has itself disallowed a sum of ₹ 1.78 lakhs in it s return of income and accordingly, no further disallowance is called for in respect of administrative expenditure as well. In response, DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. 6. We have heard the rival contentions and perused the material on record. In our considered view, since the assessee is having substantial interest free funds in the form of its own share capital available with it, accordingly, there is no reason for disallowance on account of interest expenditure incurred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to attend board meetings and make policy decisions. By no stretch of imagination it can be assumed that such activities are done without incurring any expenditure. The disallowance of administrative expenditure under section 14A of the Act was again affirmed by the Mumbai ITAT in the case of Zee Entertainment Enterprises Ltd.[2017] 81 taxmann.com 379 (Mumbai) . The Ahmedabad ITAT 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. In our view, the law is unanimous on the point that administrative expenses need to be disallowed as per Rule 8D.However, since in the instant facts, the assessee has suo moto disallowed a sum of ₹ 1.78 lakhs in its return of income while making disallowance under section 14A read with Rule 8D, no further disallowance is called for on account of administrative expenditure. 7. In the result, Grounds Number 1 of the assessee s appeal is allowed. 8. Grounds Number 2: This ground relates to Ld. CIT(Appeals) confirming the disallowance of ₹ 17,77,659/- made under section 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication and documentary evidences in support of this difference, and accordingly confirmed the aforesaid addition on account of bogus credit balance/liability. 12. Before us, counsel for the assessee has submitted that the entire difference is primarily on account of opening balance in the books of the assessee and its creditor M/s Jay Metal Industries. He is also produced before us copy of Ledger account of M/s Jay Metal Industries for assessment years 2009-10 and 2013-14 and also the contra Ledger account of the assessee in the books of M/s Jay Metal Industries for assessment years 2013-14 and 2012-13 in order to explain the difference. The counsel for the assessee submitted that the difference stands fully explained and Ld. CIT(Appeals) erred in facts and in law in not properly appreciating the same. In response, DR has placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. 12.1 Accordingly, in the interests of justice, the matter is being set aside to the file of AO for fresh adjudication after allowing due opportunity of hearing to the assessee to produce the necessary documents in support of the reconciliation for this difference. 13. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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