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2015 (7) TMI 905 - AT - Income TaxDisallowance u/s.14A(1) - applicability of rule 8D - Held that:- The reference to the turnover ratio, which it says would easily be at 4 to 5, stands made by it only toward assigning a weight to this predominant intent for acquiring shares, and no other purpose, itself stating that it cannot be said to be scientific in the sense that it is not amenable to measurement. The said reference has been clearly misconstrued in pleading for lowering the ratio (than 1/5) on the basis of a high turnover ratio. The assessee in the present case has, in fact, rather than earning income, suffered a loss, defeating the assessee's argument. In fact, we observe the entire borrowing in the present case to be toward funding the assessee's current assets. We are, therefore, not moved in any manner to disturb the said ratio from 1/5, which shall apply. It needs to be emphasized that the prescription under r.8D(2)(iii) is not based on the volume or quantum of expenditure incurred by the assessee, but, as tribunal clarifies, only on one variable, i.e., investment in the relevant assets (on an average). As such, raising a claim for a lower disallowance, i.e., than that as statutorily prescribed per r.8D(2)(iii), a constitutionally valid provision, would not obtain. The only exception, which would in fact be in terms of r. 8D itself, would be where the expenditure incurred is below that arrived at per the prescribed formula, so that following the same would lead to an absurdity, as observed by the tribunal in the case of disallowance of total interest attributable to shares held as stock-in-trade. In the facts of the present case, excluding the security transaction tax (STT), would yet leave indirect expenditure at ₹ 131.6 lacs, as against the disallowance of ₹ 18.57 lacs. There is, in our view, no scope for excluding the legal and professional expenses, details of which are absent, incurred as it is in the course of regular business, which gives rise to both taxable income as well as the tax free dividend income. In view of the foregoing, a ratio (1/5 or lower), i.e., as in the case of interest expenditure for indirect expenditure, thus, is not feasible for being prescribed or laid down on facts or in law.
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