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2021 (1) TMI 393 - AT - Income TaxDisallowance under section 14A read with Rule 8D(iii) - actual claim of administrative expenses apportioned to the exempt income - quantum of indirect / administrative expenditure disallowance u/r 8D(2)(iii) - HELD THAT:- It is evident that the assessee is primarily aggrieved by indirect expenditure disallowance u/s 14A which has been computed as per Rule 8D(2)(iii). The issue of interest disallowance made by Ld. AO u/r 8D(2)(ii) has already attained finality and the same is not under dispute and not a subject matter of present appeal. This is the second round of litigation since the matter in the first round was remanded back to the file of Assessing Officer [AO] by coordinate bench of this Tribunal [2016 (10) TMI 1253 - ITAT MUMBAI] We find that the assessee has made adhoc disallowance of Telephone expenses, stationery expenses and salary expenses. The salaries component is based on estimated proportionate time spent by certain employees who could be said to have devoted time towards investment activity. The disallowance is in the range of 10% to 25% of salary cost of these personnel.AO was not satisfied with the aforesaid disallowance since the assessee would have incurred expenditure under other heads as well. Assessee has identified the composite expenditure under each head and apportioned the composite expenditure in the ratio of exempt income vis-à-vis total receipts during the year. The employee cost has separately been apportioned on the basis of time devoted by certain employees which could be said to have been engaged in investment activities. Upon perusal of the same, we find that this method of computing the disallowance was very fair, reasonable and scientific and therefore, was to be accepted. As per the provisions of Sec.14A, disallowance has to be computed having regards to the accounts of the assessee and if the said method adopted by the assessee was found to be not satisfactory, only then the computation was to be done as per Rule 8D. Therefore, we are of the considered opinion that the computations made by assessee to identify the disallowance was quite fair and reasonable. Disallowance u/r 8D(2)(iii) is accepted at ₹ 24.50 Lacs - Since the assessee has already disallowed a sum of ₹ 16,51,524/- in its computation of income, the net disallowance would work out to be ₹ 7,98,476/-. The Ld.AO is directed to recompute assessee’s income in terms of our above order.
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