9911796707
TMI Blog2024 (9) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not feasible considering the huge quantum of investments made by the assessee earning exempt income to the tune of approx. 25.65 Crs nor do we find it was explained by the assessee with cogent reasons. AO, we hold, was correct in being not satisfied with the claim of the assessee of NIL expense being incurred for earning exempt income. The invocation of Rule 8D of the Rules, as a consequence, we hold, has been rightly held by the Ld. CIT(A) to be in accordance with law as per section 14A(2)/(3) of the Act. The order of the Ld. CIT(A) confirming the disallowance made u/s 14A is accordingly upheld. - Decided against assessee. Disallowance of deduction claimed u/s 80IA - reduction of profits of the eligible unit by allocating certain Head Office/Common expenses to the eligible unit - HELD THAT:- No merit in the disallowance made by allocating the common expenses to the eligible unit and thus reducing the deduction claimed u/s 80IA of the Act to Rs. 1,07,897/-. Firstly, it is a fact on record that the quantum of operation of the eligible unit was miniscule as compared to the ineligible unit, with the ineligible unit accounting for almost the entire turnover of the assessee to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest bearing funds from which exempt income was earned nor any expenditure has been incurred to claim the exempt Income. And the appellant has proved the nexus that all the investments made during the year were from interest free funds. In view of this, there is no justification in making the disallowance and therefore the disallowance so made prayed to be deleted. 2. Without prejudice to the above, the Ld. CIT(A) has erred in confirming disallowance u/s. 14A r.w.r. 8D of the Rules of Rs. 23,00,575/- which is bad in facts as well in law. On the basis of facts and circumstances of the case, such disallowance made is incorrect and thus it is prayed to delete the impugned disallowance. 3. We have heard both the parties. The facts relating to the issue are that the assessee was noted to have made huge investments, yielding exempt income, amounting to Rs. 25.72 crores as at the beginning of the year i.e. on 01.04.2016 and Rs. 25.65 crores as at the end of the year i.e. on 31.03.2017. Further, the assessee had earned exempt income in the form of dividend u/s 10(34) of the Act and Long Term Capital Gain u/s 10(38) of the Act as under:- (i) Dividend from companies - Rs. 13,97,382/- u/s 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Hence the addition made is not tenable. Several case laws were cited by the appellant in favour of such contention. 6.3 The argument raised by the appellant is wide of the mark as its argument is based on the provision of law or Rule 8D which has been amended w. e. f. 02.06.2016 and applicable for the year under consideration, i. e. AY 2017-18. The amended rule is as under:- [Method for determining amount of expenditure in relation to income not includible in total income. 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2) [(2) The expenditure in relation to income which does not form part of the total income shall be the aggregale of following amounts, namely: (i) the amount of expenditure directly relating to income which does not form p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the assessee for making investments yet it had suo moto made a disallowance of Rs. 31 lacs u/s 14A of the Act. Further, we agree with the AO that the possibility of incurrence of NIL administrative expenses was not feasible considering the huge quantum of investments made by the assessee earning exempt income to the tune of approx. 25.65 Crs nor do we find it was explained by the assessee with cogent reasons. 9. In the light of the aforestated facts, the AO, we hold, was correct in being not satisfied with the claim of the assessee of NIL expense being incurred for earning exempt income. The invocation of Rule 8D of the Rules, as a consequence, we hold, has been rightly held by the Ld. CIT(A) to be in accordance with law as per section 14 A(2)/(3) of the Act. 10. The order of the Ld. CIT(A) confirming the disallowance made u/s 14A of the Act of Rs. 23,00,575/- is accordingly upheld. 11. In view of the above, Ground Nos. 1 2 raised by the assessee are dismissed. 12. Ground No. 3 of appeal raised by the assessee reads as under:- 3. The Ld. CIT(A) has erred in confirming the addition of Rs. 1,07,897/- being deduction claimed u/s 80IA of the Act by Rs. 1,07,897/-. The total expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee before the ITAT where allocation of such expenses to the eligible unit was held to be inappropriate, having no bearing to the earning of income by the eligible unit and the disallowance made, therefore, was deleted. Our attention was drawn to the order of the ITAT pertaining to AY 2008-09 placed at paper-book page No. 73 to 91. It was pointed out that in the said case, the assessee had claimed exemption/deduction u/s 10B of the Act and this exemption/deduction was reduced by allocation of commission/Head Office expenses in the nature of Director s remuneration, Bank Charges, Auditors Remuneration/Auditors fees, amounting to Rs. 21,23,528/-. Our attention was drawn to paragraph No.14 of the order, wherein the ITAT noted the facts relating to the expenses and the finding of the ITAT thereafter that there was no logic in allocating these expenses to the eligible unit. The relevant finding of the ITAT are as under:- 14. The A.O. has nowhere disputed that the bank charges incurred in relation to transactions made with the bank for CPC Blue Division which is 100% EOU has not been debited to the accounts of Blue Division. The auditor's remuneration and the internal audit f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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