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TMI Blog2012 (6) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... was increase in the investment and which resulted in Long Term Capital Gain amounting to Rs. 1,04,52,765/- and dividend income amounting to Rs. 2,64,637/-, both were not form part of total income of the assessee company. The assessee company has not disallowed any expenditure in terms of interest cost, administrative cost or any other expenses with regard to making and managing such investments which had resulted in substantial exempt income of Rs. 1,07,17,402/-. The ld. A.O. applied Rule 8D of IT Rules, 1962 and calculated the disallowance of Rs. 5,35,926/- u/s 14A of the IT Act. 3. Being aggrieved by the order of ld. A.O., the assessee filed first appeal before CIT(A)-6, Ahmedabad, who had adjudicated this issue vide his order dated 28.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed expenses relatable to exempt income as per rule 8D which is mandatory from assessment year 2008- 09. For interest, proportionate expense is disallowable whereas for other expenses .5% of average investment value is disallowable. Considering the fact that appellant claimed huge administrative and other expenses, the disallowance of administrative expenses made by the assessing officer @.5% of investment resulting in exempt income is as per the formula given in rule 8D which is mandatory for making disallowance. In view of this the addition @ .5% of investment resulting in exempt income made by the assessing officer is confirmed. As regards interest, appellant had borrowed funds on which interest was paid. While making investments, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 (Punjab & Haryana Highcourt)] b. K Raheja Corporation Pvt Ltd v/s The Commissioner of Income Tax, Central II, Mumbai [ITA 1260 of 2009] - Hon'ble Mumbai High Court A.Y. 05-06 c. Minda Investments Ltd V/s DCIT [Circle 6(1), New Delhi-Appeal No ITA- 4046/2009] A.Y. 06-07 d. Dy.CIT, Circle -6(1) vs. M/s. Maharashtra Seamless Ltd. ITAT, Delhi Bench "B" ITA No. 4063 (Del)2006 A.Y. 03-04 A.Y.2003-04 Dated: 16.12.2010 and claimed that the ld. A.O. has not established any nexus between borrowed fund and investment in non taxable investment. The A.O. simply applied Rule 8D step-by-step. He further, argued that the similar addition in A.Y. 07-08 in case of Mudra Finvest [Gujarat] Ltd. by relying on the decision of Hero Cycles Ltd.(supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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