TMI Blog2016 (12) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the AO to disallow 2% of the exempt income. Being so, we do not find any infirmity in the order of Ld.CIT(A) and the same is confirmed. Disallowance of expenses relatable to earning the dividend income by applying Rule 8D - Held that:- Admittedly for this assessment year Rule-8D is applicable and there should be disallowance u/s.14A read with Rule 8D. However, while considering the applicability of Sec.14A r.w.Rule 8D, the investment made by the assessee in subsidiary companies are not on account of investments for earning capital gains or dividend income, but such investments have been made by the assessee to promote the subsidiary company on account of commercial expediency and earning of dividend income from such activity is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as declared by the assessee. 3. The facts of the issue are that the assessee filed an appeal for the same assessment year in ITA No.2087/Mds./2011. In the first round, the Tribunal vide its order dated 25.05.2012 has set aside the order of the lower authorities with respect to the issue of disallowance of ₹ 26,69,572/- effected under Rule 84 r.w.s.14A of the Act and has remitted back the issue to the file of the AO for adjudication of the same afresh following the Tribunal decisions in the case of M/s.Auchtel Products Ltd. in ITA Nos.3183,2649 3185/2011 dated 30.04.2012 and M/s.Lakshmi Ring Travellaer Vs. ACIT in ITANo.2083/Mds./11 dated 02.03.2012. AO completed the assessment following the above cited two judgements of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant accounting period is 01.04.2007 to 31.03.2008. It is also clear from a perusal of Rule 8D that the same was notified on 24.03.2008. The moot question accordingly before us is whether Rule 8D as invoked by the Assessing Officer as well as CIT(A) would also be applicable for the period from 01.04.2007 to 23.03.2008 or not. We notice that in the case (supra) Hon ble Delhi High Court has held that the said period would not be covered neither by section 14A of the Act nor by Rule 8D. From the above discussion, it is clear that, in effect, the provisions of subsections (2) and (3) of Section 14A would be workable only with effect from the date of introduction of Rule 8D.. In the light of the observations of the Hon ble Jurisdictional Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, incurring certain administrative expenses cannot be ruled out. Accordingly, by placing reliance on the judgement of the Jurisdictional High Court in the case of Simpson Co. Ltd in T.C. No.2621/2006,dated 15.10.2012, we are of the opinion that the Ld.CIT(A) is justified in directing the AO to disallow 2% of the exempt income. Being so, we do not find any infirmity in the order of Ld.CIT(A) and the same is confirmed. 6. In the result, both the appeals filed by Assessee and Revenue for assessment year 2008-09 are dismissed. Next we take up Assessee s appeal in ITA No.880/Mds./16 for assessment year 2009-10 7. The only issue is with regard to disallowance of expenses of ₹ 36,19,979/- relatable to earning the dividend inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record. Admittedly for this assessment year Rule-8D is applicable and there should be disallowance u/s.14A read with Rule 8D. However, while considering the applicability of Sec.14A r.w.Rule 8D, the investment made by the assessee in subsidiary companies are not on account of investments for earning capital gains or dividend income, but such investments have been made by the assessee to promote the subsidiary company on account of commercial expediency and earning of dividend income from such activity is only incidental. Therefore, investment made by the assessee in its subsidiary should not be considered while applying the disallowance u/s.14A r.w.Rule 8D. Being so, we direct the AO to compute the average value of the investment un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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