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TMI Blog2016 (5) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned CIT (Appeals)-IV erred in confirming the order of Ld. A.O. for disallowing the expenses of Rs. 71,44,183/- incurred in relation to earning the tax free income during the year by invoking section 14A r.w.r. 8D of Income Tax Act, 1961 without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend or alter and substitute any of the above mentioned grounds of appeal before or at the time of hearing of appeal." 2. Briefly Stated, the facts of this case are : during the scrutiny proceedings, the assessee shown to have earned exempt income in the form of dividend under section 10(34) of the Income-tax Act, 1961 (hereinafter 'the Act') for Rs. 7,01,194/- on account of investment in the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and made disallowance of Rs. 71,44,183/-; that the disallowance cannot be more than exempt income earned during the year as has been done by the AO/CIT(A) in this case. However, on the other hand, the ld. DR for the revenue relied on the orders passed by the AO/CIT(A). 6. Undisputedly, assessee earned exempt income by way of dividend to the tune of Rs. 7,01,194/- (inclusive of Rs. 55,000/- dividend from the investment in shares and claimed the same as exempted u/s 10(34) of the Act). Detailed computation of income has been brought on record by the assessee, lying at page 1 of the paper book. 7. However, the AO being not satisfied with the computation made by the assessee made the disallowance u/s 14A read with Rule 8D computed as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. This issue has been dealt with by the Hon'ble jurisdictional High Court in judgment cited as Joint Investments Pvt. Ltd. vs. CIT - (2015) 372 ITR 694 (Del.). 10. The operative part of the judgment in case of Joint Investment Pvt. Ltd. (supra) is reproduced for ready reference as under :- "Disallowance under Section 14A read with Rule 80 - assessee volunteered - Rs. 2,97,440/- as attributable under Section 14A for the purpose of disallowance - AO on the basis of his own understanding of Rule 8D of the Income Tax Rules disallowed the sum of Rs. 52,56,197/- Held that:- In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs. 2,97,440/- as a disallowance under Section 14A had to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of Rs. 54,217/-; that the assessee has sufficient funds to invest in the tax free investment which was part of its business activities; that the ld. CIT (A) has taken hypothetical figure of Rs. 22,05,762/- as voluntary disallowance made by the assessee u/s 14A as against the actual disallowance made by the assessee u/s 14A to the tune of Rs. 54,217/- and this fact goes to prove that the CIT (A) has proceeded to affirm the disallowance made by the AO without going into the merit. 12. In the instant case, AO worked out the disallowance as per section 14A read with Rule 8D of the Income-tax Rules which is not sustainable in the view of law laid down by Hon'ble jurisdictional High Court in judgment cited as Joint Investments Pvt. Ltd. vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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