TMI Blog2018 (5) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is partly allowed. Protective addition - Capital addition - Held that:- CIT(A) has recorded that addition made on this issue in assessment year 2006-07 has been upheld by the 1st appellate authority and the assessee has deposited the relevant taxes during financial year 2008-09 and 2009-10. CIT(A) has concluded that the capital gain has been assessed in assessment year 2006-07 in accordance with the provisions of section 45 of the Act. In our opinion, the order of the Ld. CIT(A) on the issue-in-dispute is well reasoned and we do not find any infirmity in the same. Accordingly, the ground No. 2 of the appeal of the Revenue is dismissed. - ITA No.2568/Del/2016 - - - Dated:- 27-4-2018 - Sh. Bhavnesh Saini, Judicial Member And Sh. O.P. Kant, Accountant Member Appellant by : Ms. Shefali Swaroop, CIT(DR) Respondent by : Sh. R.M. Mehta, CA Sh. Pradeep Kumar, CA ORDER PER O.P. KANT, A. M. This appeal by the Revenue is directed against order dated 23/03/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-39, New Delhi [ in short the Ld. CIT(A) ] for assessment 2008-09, raising following grounds: 1. On the facts and in the circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilized for the purpose of acquisition of the shares leading to earning of exempt income, thus, he issued show cause notice to the assessee as why the interest expenditure incurred for investment in shares yielding exempt income, may not be disallowed under the provisions of section 14A of the Act. The assessee explained that the investment was made out of own surplus funds and no loan funds were utilized for making investment. It was also submitted that the dividend was normally credited through electronic clearing scheme of the banks, directly in the bank account and, therefore, no expenditure was incurred for earning the dividend income also. The Assessing Officer did not accept the contentions of the assessee and invoking Rule 8D of the Rules, made disallowance of ₹ 1,26,91,885/- as under: (i) expenditure directly related to exempt income under Rule 8D(2)(i) ₹ 16,64,176/- (ii) Proportionate interest expenditure not attributable directly to particular income under Rule 8D(2)(ii) Rs. Nil (ii) Administrative exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for in the case of the assessee. The Ld. counsel referred to page 8 of the paperbook and submitted that entire finance charges were disallowed by the Assessing Officer without correlating borrowed money with the investment. He also submitted that before invoking the Rule 8D of the Rules, the Assessing Officer did not record dissatisfaction in respect of the claim of the assessee. He also referred to the calculation mistake under Rule 8D(2)(iii) of the Rules. 3.5 On the other hand, the Ld. DR referring to para 2.5 of the assessment order, submitted that the Assessing Officer duly recorded dissatisfaction with the claim of the assessee and thereafter invoked Rule 8D for computation of the disallowance in terms of section 14A of the Act. She further relied on the decision of Hon ble Supreme Court in the case of Maxopp Investment Limited (2018) 91 taxmann.com 154 (SC) and submitted that in case of mixed funds, disallowance could be made under Rule 8D(2)(ii) of the Rules. 3.6 We have heard the rival submission and perused the relevant material on record. In terms of section 14A(2) of the Act, before invoking Rule 8D of the Rules, the Assessing Officer is required to dissatisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point out any error in the verification and finding of fact recorded by the Ld. CIT(A). 3.10 In view of the above, no disallowance could be made for expenditure directly relatable to the investment in terms of Rule 8D(2)(i) of the Rules. 3.11 We also note that the correct amount of disallowance under Rule 8D (2)(iii), has been worked out by the Ld. counsel of the assessee at ₹ 5,42,745/-. The Ld. DR could not find out any error in the said computation. However, we note that in the case of Joint Investment Company P. Ltd. (ITA No. 117/2015), the Hon ble Delhi High Court in the decision dated 25.02.2015, observed that by no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed and the window for disallowance as indicated in Section 14A, is only to the extent of disallowance of expenditure incurred by the assessee in relation to the tax exempt income . The Hon ble High Court held that this proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in that case. Following the above decision, the Tribunal in number of cases restricted the disallowance und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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