TMI Blog2016 (2) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... utable to earning of exempt income cannot be excluded. However as held in the case of Sarabhai Holdings Pvt. Ltd. v. ACIT, (2014 (4) TMI 1081 - ITAT AHMEDABAD ), only average of value of investment from which exempt income has been earned is to be considered and not total investment at beginning of year and at end of year, in disallowing administrative expenses. We accordingly set aside this issue for computing the disallowance by giving proper opportunity to the assessee. - Decided in favour of assessee statistically - I.T.A. No.199/DEL/2014 - - - Dated:- 18-1-2016 - SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri V.K. Sabharwal, Adv. For The Respondent : Shri Raman Kant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the there has been no disallowance of expenditure that has been made by the assessee u/s.14A r.w.R 8D of the Act. Accordingly, the ld. Assessing Officer after recording the satisfaction computed the disallowance the disallowance u/s.14A r.w.R 8D of the Act at ₹ 1,41,206/- 3. Aggrieved by the order of the ld. Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). Ld. CIT(A) observed that the assessee has earned tax free income of ₹ 900/- as dividend. Ld.CIT(A) upheld the addition made by the ld.AO. 4. Aggrieved by the order of the ld. CIT(A), assessee is in appeal before us. 4.1. Ld. AR argued that the assessee has earned tax free income amounting to ₹ 900/- from Hindustan Petroleum Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 339 ITR 632 (Bom) v) CIT vs. Metalman Auto P.Ltd., reported in 336 ITR 434 (P H) vi) CIT vs. Torrent Power Ltd., reported in 363 ITR 474 ( Guj) 5. On the contrary, ld. DR submitted that the Assessing Officer has rightly initiated section 14A of the Act and, after recording the satisfaction, has made the addition to the extent of ₹ 1,41,206/-. Learned DR submitted that even where the assessee claimed that no expenditure had been incurred, and that such a claim of the assessee was found to be not acceptable by the Assessing Officer and thus disallowance was justified. 5.1. On the other hand, Ld. Department Representative relied upon the order of the Assessing Officer and opposed the request of the assessee s counsel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rest are associates/related companies. 6.2. The details of the Administrative expenses are given in Schedule 15 and financial expenses are given in Schedule 16 to the profit and Loss accounts. It is also an admitted position that the assessee has not made any suo moto disallowance in respect of the expenditure that could have been incurred to earn the dividend of ₹ 900/- for the year under consideration. 6.3. Considering that assessee is also involved in the activity of investment, we proceed to analyse the legal position applicable to the facts of the present case. 6.4. Sub-section (2) of section 14A of the Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under Rule 8D(2)(ii). Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D (iii).The assessee has also failed to prove that the investment made in the other companies are strategic in nature. TheLd.CIT(A) has recorded a finding that the assessee has not submitted any evidence to establish that borrowed funds are for specific purpose. Further administrative expenses that could be attributable to earning of exempt income cannot be excluded. However as held in the case of Sarabhai Holdings Pvt. Ltd. v. ACIT, ITA No. 2328/Ahd/2012, dated 11/4/2014 (Ahd.)(Trib.), only average of value of investment from which exempt income has been earned is to be considered and not total investment at beginning o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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