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2019 (2) TMI 1612 - AT - Income TaxDisallowance u/s 14A - suo moto disallowance by assessee - addition deleted by the CIT(A) - AO carried out the assessment proceedings u/s 143(3) r.w.s 263 - HELD THAT:- No interest expenditure has actually been claimed by the assessee during the year, and in absence of such claim of interest expenditure, there remains no basis for computing disallowance of interest under Rule 8D(2)(ii) of the IT, Rules. No justification in the finding of AO making disallowance of interest incurred u/s 14A of the Act at ₹ 1,67,32,308/- (Disallowance computed under rule 8D(2)(ii) of the IT Rules at ₹ 19,37,39,516 – suo moto disallowance of net interest expenditure by the assessee at ₹ 17,70,07,208/-. Net interest expenditure is to be considered for applying the factors in Rule 8D(2)(ii). In the instant case, as the assessee has not claimed any interest expenditure against the total income no disallowance of interest is called for u/s 14A of the Act by applying Rule 8D(2)(ii) of the IT, Rules. As regards 3rd limb i.e. Rule 8D(2)(iii) of IT, Rules is concerned certainly some expenditure should have been incurred by the assessee for its regular business activities apart from earning exempt income which the assessee has submitted to have been incurred at ₹ 65,025/- towards salary disallowance and ₹ 63,483/- on account of Statutory Auditors Remuneration. After giving the set off to the above referred expenses remaining amount is ₹ 7,22,648/-(Rs. 851156-65025-63483). Therefore, in the given facts and circumstances of the case the disallowance u/s 14A under the 3rd limb of Rule 8D(2)(iii) of the I.T. Rules stands confirmed at ₹ 7,22,648/- for A.Y. 2008-09. In the result against the total addition made by the assessing officer at ₹ 1,76,09,474/-, we sustain the addition u/s 14A of the Act at ₹ 7,22,648/- of the Act and partly allow the revenue’s appeal for A.Y. 2008-09. Disallowance of administrative expenses - Taking consistent view as taken for A.Y. 2008-09 observe that for A.Y. 2011-12 against the administrative expenses of ₹ 8,51,156/-, assessee has contended that disallowance if any to be made for administrative expenses should be restricted to ₹ 7,22,648/-. We find that for A.Y. 2008-09 average investments fetching exempt income stood at ₹ 421.98 cr. which has grown to ₹ 803.40 cr. for A.Y. 2011-112. We, therefore, being fair to both the parties and taking consistent approach, are of the view that disallowance of ₹ 7,50,000/- shall be justified towards the disallowance of administrative expenses which may have been incurred for administrating the investments fetching exempt income. We accordingly order so and direct the assessing officer to sustain the disallowance u/s 14A of the Act at ₹ 7,50,000/- under Rule 8D(2)(iii) of the IT, Rules.
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