TMI Blog2014 (4) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. The assessee has maintained separate books of account for investment and business purposes - the AO without recording any dissatisfaction with regard to the claim of the assessee that no expenditure was incurred by the assessee for earning the exempt income, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act - CIT(A) also failed to consider the submissions of the assessee that the assessee had been maintaining separate accounts for business and investment purposes while confirming the disallowance – thus, the disallowance made by the lower authorities is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 2. The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] dated 07.09.2011 3. The only substantive issue raised by the assessee through his grounds of appeal is with regard to the confirmation of disallowance of Rs.11,11,673/- u/s 14A of the Income Tax Act, 1961 (the Act). 4. The Assessing Officer (hereinafter referred to as the AO) during the assessment proceedings observed that the assessee had received a sum of Rs.4,93,700/- by way of dividend and claimed the same as exempt income. The assessee claimed that he had incurred no expenditure to earn the exempt income. He further submitted that the assessee had maintained separate books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be applied only if the assessee's method is not satisfactory. It has been further held that Rule 8D is not retrospective and applies from A.Y. 2008-09. It may be further observed that under section 14A of the Income Tax Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. 7. We may further observe that the Hon'ble Bombay High Court in the case of 'CIT vs. Reliance Utilities and Power Ltd.' has observed that if there are funds available, both interest free and overdraft/loans taken, then presumption would arise that investments wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt period of time, then under such circumstances disallowance cannot be made on the entire loan amount but a very reasonable proportionate disallowance can be made and even in certain cases can be ignored due to the shortness of the period between the date of advancement/expenditure and date of availability of own funds. It can be observed by the Assessing Officer from the Balance Sheet as to whether sufficient own funds were available to the assessee during the financial year or the interest free funds were generated during the course of the year even if the assessee could not prove the availability of own funds on the particular date of investment/advancement/expenditure. 7.2 In the case in hand the assessee has maintained separate boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exempt income and to decide the issue accordingly following the above guidelines/observations. Needless to say that the A.O. will provide proper opportunity to the assessee to file the necessary documents and accounts etc. including fund flow statement, if any as per law. The AO thereafter, will duly examine the explanation/ documents so produced by the assessee in this respect and give a specific finding in this respect by way of a speaking order. The ground taken by assessee is allowed for statistical purposes. I.T.A. No.7421/Mum/2011 8. The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] dated 06.09.2011 relevant to the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liberty to raise his contentions in this respect in subsequent years. The method adopted by lower authorities for ascertaining ALV for the current year will not be binding upon the assessee in subsequent years. With the above observations Ground No.1 of the appeal is hereby dismissed. 12. Vide ground No.2, the assessee has agitated the disallowance of Rs.70,01,260/- u/s 14A r.w.r.8D. The assessee in this case is engaged in the car rental business. The contention of ld. AR has been that loan was taken for the car rental business, whereas the assessee had invested his own money for investment for earning exempt income. The facts as well as contention raised by the assessee are identical to that of the facts raised in ITA No.7422/Mum/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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