9911796707
TMI Blog2013 (11) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... with rule 8D:- 1. The learned CIT (A) erred in upholding the disallowances of Rs.19,56,521/- (Gross Amount Rs.23,91,539/- Less Already disallowed by assessee in computation Rs.4,3 5,018/- ) under section 1 4A of the Act by invoking rule 8D of the Income-tax Rules, 1962 ("the Rules") without appreciating the fact that the appellant himself has disallowed and already added in computation of income a sum of Rs.4,35.018/- (being 5% of dividend income of Rs.87,00,367/- ) at the time of filing return of income itself. 2. The learned CIT(A) erred in not appreciating that Rule 8D cannot be invoked in facts of present case as the investment in shares of Rs. 54.19 crores were made out of own funds of Rs. 129.09 Crores and no interest expenditure wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D AO did not attribute any expenditure which directly relates to exempted income and also did not include any disallowable interest. The AO has only taken an amount equal to ½ % of the average of the value of investment, income from which does not or was not form part of the total income as appearing in the balance sheet on the first day and the last day of the previous year as per column No.3 of the prescribed formula under Rule 8D. Therefore, the disallowance is only in respect of ½ % of the average value of such investment. 3. Before Ld. CIT(A) it was the submission of the assessee that it did not make any investment in shares for the purpose of earning dividend income which is an incidental receipt. The intention of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no borrowed funds were utilized for investment in the shares from which dividend income has been earned as assessee has failed to show from any cash flow statement to be submitted in this regard. By relying upon the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Company vs. DCIT, 328 ITR 81 (Bom) vide which it was held that Rule 8D is applicable in respect of A.Y 2008-09, Ld. CIT(A) has upheld the action of AO. The assessee is aggrieved, hence, has filed aforementioned grounds of appeal. 4. After narrating the facts it was submitted by Ld. AR that in assessment year 2005-06 and 2006-07 the department has accepted the disallowance to the tune of 5% of the dividend income. The investment of the assessee in sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod is wrong, disallowance is to be deleted. 4. Hon'ble Bombay High court decision in the case of Godrej & Boyce Mfg. co. Ltd. (2010) 328 ITR 81(Bom) held that Assessing Officer has to record his satisfaction in regards to be working of Assessee's claim. 4.1 Ld. AR also furnished following calculations which excluded investment in unquoted shares: Calculation of Disallowance under section 14A (After Reducing the Value of Investment in which No Exempt Dividend or LTCG Exempt u/s. 10(38) was earned) Sr. No. Particulars 31-Mar-08 31-Mar-07 1 Investment as per Balance Sheet 414,742,871 541,872,615 2. a. i. ii. b. i. ii. Iii 3. Less: Investment on which Tax Free Dividend Or Exempt Capital Gain was not earned Preference S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14A. As per mandate of section 14A(1) deduction cannot be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. As per mandate of sub-section (2) of section 14A, if AO, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure, he will determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Income Tax Act in accordance with such method as may be prescribed. The method prescribed is under Rule-8D. It is not the case of assessee that disallowance under Rule 8D has been incorrectly calculated. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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