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TMI Blog2014 (7) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, the Assessing Officer (hereinafter referred to as the AO) disallowed an amount of Rs. 2,56,32,363/-, as against the assessee's suo-moto disallowance of Rs. 1,75,73,740/- u/s 14A read with Rule 8D of the income Tax Rules. The ld. CIT(A) deleted the said disallowance made by the AO. The Revenue has thus come in appeal before us with the following grounds: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance of Rs. 80,58,623/- under provision of sec. 14A of the I. T. Act 1961 r.w. Rule 8D of the Income Tax Rules. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing netting off of interest income against expenditure incurred for interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 80,58,623/- on the such additional deposits made with 'the lender' to maintain the appropriate margin money. The total interest expenditure in respect of the loan amount was Rs. 2,55,81,815/-. Hence, for working out the disallowance u/s 14A read with Rule 8D, the assessee netted off the interest expenditure with the interest income and claimed financial expenses to the extent of the net amount of Rs. 1,75,23,192/- in the P&L account. The total administrative and financial expenses debited in the P&L account during the year (inclusive of Rs. 1,75,23,192/-) were Rs. 1,75,73,740/-. Hence, the assessee suo-moto disallowed the whole of administrative, selling and financial expenses of Rs. 1,75,73,740/- under section 14A while comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trative, selling and financial expenses of Rs. 1,75,73,740/- (which included the net finance cost of Rs. 1,75,23,192/-) under section 14A while computing its taxable income. He further observed that as per subsection (2) section 14A of the Act, the AO could determine the disallowance as per rule 8D, if he, having regard to the correctness of the claim of the assessee in respect of such expenditure, was not satisfied. However, before doing so, the AO had to first demonstrate as to why the suo-moto disallowance made by the assessee was not satisfactory. But, the AO in this case simply worked out the disallowance as per Rule 8D. Even he, instead of taking the net interest expenditure, adopted the gross figure of interest expenditure. He furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the ld. representatives of the parties and have also gone through the record. The assessee in this case had himself disallowed all the expenditure claimed to be incurred by him. The ld. CIT(A) after proper appreciation of the facts has categorically held that there was a direct nexus between loan, interest paid on loan amount, the interest received on margin money as well the investments made. Under the facts and circumstances of the case, in our view, the ld. CIT(A) rightly held that the assessee was right in his action in netting the interest received against the interest paid, while calculating the interest expenditure incurred for the purpose of investments as the source of money for investment and the destination of expenditure were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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