9911796707
TMI Blog2012 (7) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner of Income Tax(Appeals) erred in confirming the disallowance of expenses of Rs. 26,69,572/- under Section.14A, alleged to be relatable to earning the dividend income, by applying Rule 8D. 2.1. The learned Commissioner of Income Tax(Appeals) ought to have appreciated that under Section.14A only the actual expenditure incurred for the purpose of earning exempt income should be disallowed. The appellant has not incurred any expenditure for earning the dividend income. 2.3.. The learned Commissioner of Income Tax(Appeals) ought to have appreciated that the Hon'ble Punjab & Haryana High Court in the case of C.I.T Vs. M/s.Hero Cycles Ltd reported in 323 ITR 518 has held that 'Disallowance under Section.14A requires finding of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.14A of the Act r.w. Rule-BD - Rs.26,69,572: The Assessing Officer, after noticing that the assessee's income included exempted income and the assessee has not segregated and excluded any expenditure pertaining to the exempted income, invoked the provisions of sec.l4A of the Act and worked out such expenditure at Rs.26,69,572/- as per Rule-8D r.w.s.14A of the Act. The assessee, before the undersigned, claimed that the Assessing Officer, before invoking the provisions of Rule 8D r.w.s.14A of the Act, has not given the reasons as to why he was invoking the provisions of Rule 8D r.w.s.14A of the IT Act. The assessee also drew the attention of the undersigned to the provisions of Rule 8D(1), where it was stated that the provisions of Rule-8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. The contentions of the assessee are considered carefully. As held by the Bombay High Crn.lrt in the case of Godrej & Boyce Mfg. Co. Ltd. v. DCIT (328 ITR 81)(Bom.), the provisions of Rule 80 are applicable prospectively only i.e. A.Y.2008-09 and onwards. Similarly, the Hon'ble High Court of Delhi, while disposing off a number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return of income filed by the assessee there was exempted income earned by the assessee and the assessee has not segregated and allocated any expenses towards earning such exempted income. Therefore, the Assessing Officer has rightly invoked the provisions of Rule-8D r.w.s. sec.14A of the Act. In-fact, the Assessing Officer specifically mentioned it in his order, at paras 2 and 3 of page no.6. Next, as regards to the determination of disallowance in various steps of formula given in Rule-8D, the Assessing Officer has not attributed any direct expenses for earning the exempt income at step-I. While determining the proportionate indirect interest expenses, the Assessing Officer clearly segregated the direct interest pertaining to various ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had been using its common man power and other facilities thereby incurring some element of expenses. Such expenses need to be quantified and disallowed u/s.14A of the Act. Further reliance is also placed on the following decisions, where it was held that the Assessing Officer is duty bound to estimate the reasonable disallowance u/s.14A of the Act. Dy. CIT v. SREI International Finance ltd. [2006] 10 SOT 722 (Delhi)- Trib.). In light of clear provisions of section 14A, even in case it is not possible to identify expenses incurred in earning income which does not form part of total income, disallowance has to be made on some basis. Marezban Bharocha v. Asstt. CIT [2007] 12 SOT 133 (Mum. - Trib.).- Where an expenditure is composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Assessing Officer in disallowing expenses of Rs.26,69,572/- as per Rule-8D r.w.s.14A of the Act, is confirmed." 5. During the course of hearing, the Authorised Representative of the assessee filed before us a copy of order of the Mumbai Bench of Tribunal in the case of M/s.Auchtel Products Ltd. in ITA Nos.3183, 2649 & 3185/Mum./2011 for Assessment Years 2003-04, 2007-08 & 2008-09 vide order dated 30.04.2012 and submitted that the issue at hand was covered in favour of the assessee by para Nos. 12 to 15 of the order. 6. On the other hand, Departmental Representative filed a copy of order of Chennai Bench of Tribunal in the case of M/s.Lakshmi Ring Travellers Vs. ACIT in ITA No.2083(Mds,)/2011 for Assessment Year 2008-09 vid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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