TMI Blog2013 (1) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 22.10.2006 declaring total income of ₹ 10,75,67,534/-. In the said return, dividend income of ₹ 77,84,289/- was claimed to be exempt by the assessee and a disallowance of ₹ 3,89,214/- was made under section 14A on account of expenses claimed to be incurred in relation to earning of the said exempt income. In the assessment completed under section 143 (3), the Assessing Officer worked-out the expenses incurred by the assessee for earning of the exempt dividend income at ₹ 49,29,454/- by applying Rule 8D of the I.T. Rules, 1962 and made further disallowance of ₹ 45,32,240/- under section 14A. 3. The disallowance made by the Assessing Officer under section 14A was challenged by the assessee in an appeal filed before the CIT(A) and it was contended on behalf of the assessee before the CIT(A) that Rule 8D is not applicable to assessment year 2006-2007 as held by Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. 328 ITR 81 (Bom.). It was also contended that as per the said decision of the Hon ble Bombay High Court, the disallowance for the years prior to assessment year 2008-2009 requires to be made on some reasonable bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is basis suggested by the assessee has been found by the learned CIT(A) as reasonable and no argument has been raised by the learned D.R. to show that the basis suggested by the assessee and accepted by the learned CIT(A) is not reasonable. Therefore, there is no justification to sent back the issue to the Assessing Officer for verification. 7. We have considered the rival submissions and perused the relevant material on record. It is observed that in the computation of its total income, the assessee-company had suomotu made a disallowance under section 14A to the extent of 5% of the exempt dividend earned and there being no interest expenses incurred by the assessee in relation to earning of the exempt dividend income as the investment in the relevant shares was made by the assessee out of its own funds as is clearly evident from the balance sheet of the assessee as on 31.3.2006, we agree with the contention of the learned Counsel for the assessee that the disallowance made by the assessee under section 14A to the extent of 5% of the exempt dividend income itself was reasonable as held by the Coordinate Bench of this Tribunal in several cases. Moreover, we find that even the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,16,03,597 2. Addition u/s. 94(7) 2,55,716 3. Less: Expenses allocated (Refer table 1) (40,89,798) (40,89,798) 4. Less: Set off business loss (64,37,853) (64,37,853) 5. Net share trading income 11,10,75,945 11,13,31,662 Tax @ 30% (88E claim) *3,33,22,783 3,33,99,498 *Deduction restricted to tax payable = 3,33,11,220 Table 1 : Total expenses Sr. No. Particulars Amount (R) 1. Expenses as per profit and loss account 1,60,62,888 2. Less: Donation, interest, STT paid and depreciation difference. (16,27,445) 3. Less : Expenses towards dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compute the rebate under section 88E by allocating the expenditure on the same basis as taken by the assessee for the following reasons given in his impugned order From the assessment order, I find that although the Assessing Officer has observed that the allocation of expenses at ₹ 40.90 lakhs by the assessee against eligible income was without any reasonable basis but has failed to advance any reason for such observation as also lack of reasonable basis. Thus I find that the Assessing Officer has failed to indicate the reason for rejection of the assessee s basis for allocation of expenses due to which the rejection of the assessee s basis is unjustified. Further, I find that the Assessing Officer has sought to allocate the expenses in the ratio of assets as stock in trade vis- -vis total fund available without mentioning any justification for adopting such a basis. Thus, I find that the Assessing Officer has neither been able to justify the basis of allocation adopted by him nor justify the reason for rejecting the basis of allocation adopted by the assessee. In any event, I find that the allocation of expenditure on the basis of the value of assets held as stock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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