TMI Blog2014 (1) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... .1383/Ahd/2013 - - - Dated:- 22-11-2013 - Mukul Kr Shrawat And Anil Chaturvedi, JJ. For the Appellant : Shri O P Vaishnav, CIT- DR For the Respondents : Shri S N Soparkar And Mr. Vartika Chokshi, AR ORDER:- PER : Mukul Kr Shrawat This is an appeal filed by the assessee arising from an order of learned CIT-I, Ahmedabad, dated 18.03.2013 passed u/s. 263 of IT Act. The appellant has challenged the order passed u/s. 263 as follows: "1. On the facts and in the circumstances of the case, the learned CIT erred in assuming his jurisdiction u/s. 263 of the IT Act, whereas the mandatory conditions for assuming such jurisdiction are totally absent, with the result that the impugned order passed u/s. 263 is bad in law. 2. On the facts and in the circumstances of the case, the learned CIT erred in arriving at a conclusion without any basis whatsoever to the effect that the assessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the Revenue. 3. On the facts and in the circumstances of the case, the learned CIT erred in canceling the assessment order passed by the Assessing Officer on 24th December, 2010 u/s. 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempt from taxation. Sub-section (2) lays down the method by which such "expenditure incurred" is quantified. The method has been prescribed in Rule 8D, and comprises three links. The firs link relates to expenditure directly attributable to the earning of exempt income. On this account, the assessee has itself already disallowed Rs.4,88,96,471/-. The second link relating to disallowance of interest expenses not directly attributable to earning the exempt income is to be determined in terms of the formula given in the Rule. As per this formula, disallowance would be NIL, since the entire interest expense has been disallowed suo moto by the assessee treating the same as directly attributable to earning of exempt income. The third link relates to of 0.5% of the average of the value of investment income from which does not form part of the total income. Neither the provisions of the Act nor the provisions of the Rule mandate the restriction of the disallowance worked out under Rule 8D(2)(iii) to the amount of actual expenditure incurred. Whatever is the quantum worked out as per formula prescribed in the Rule, the same would represent the quantum of disallowance. Hence, the AO in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the formula as prescribed under Rule 8D of the IT Rules. As per the said formula the total disallowance was calculated by the AO at Rs.3,26,98,890/-, however, the total expenditure debited to P L A/c was only Rs.6,08,524/-, therefore, the AO had correctly restricted the disallowance to that extent, i.e., Rs.6,08,524/-. Learned AR has pleaded that a disallowance u/s. 14A could be made out of the total expenditure claimed in the P L A/c and nothing should be disallowed in excess of that figure. In support of this argument reliance has been placed on the case of Gillete Group India Pvt. Ltd., 22 Taxman.com 61 (Del). 4. From the side of the Revenue, learned CIT-DR, Mr. O.P. Vaishnav appeared and supported the order passed u/s. 263 of IT Act by learned Commissioner. He has argued that prima facie, the learned Commissioner was of the opinion that the order passed by the AO was erroneous; hence, he has rightly considered to annul that order. He has pleaded that the learned Commissioner was of the opinion that the computation of disallowance u/s. 14A read with Rule 8D was incorrectly made by the AO, therefore, it was within his jurisdiction to invoke the provisions of Section 263 of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing charges for increasing In Autho. Share capital 46136 Interest and other disallowance 48113923 49373810" 5.1 Further our attention has also been drawn on the P L A/c drawn on 31st March, 2008 according to which the assessee has claimed expenditure in respect of filing fees, Demat charges, finance charges, etc, as follows: Filing fees 126950 Demate charges 657548 Legal Expenses 48236 Miscellaneous Expenses ---- Finance charges 48182348 Preliminary expenses written off 429254 49619556 5.2 As against that the income of the assessee was earned from professional fees of Rs.6,75,000/-. The assessee had disallowed the aforelisted expenditure as we have noted from the computation of income furnished along with return. On those very facts, the respected coordinate Bench Delhi in the case of Gillete Group India (supra) has opined as under:- "5. We have carefully considered the arguments of both the sides and perused the material placed before us. Section 14A reads as under:- "Expenditure incurred i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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