TMI Blog2016 (7) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the Learned AO to disallow ₹ 14,45,202/- being 45.5% of ₹ 31,76,269/- u/s 14A of the Act to meet the ends of justice. We hold that the Learned AO cannot mechanically apply the provisions of Rule 8D for the purpose of disallowance u/s 14A of the Act. In our opinion, the same could be used only as a last resort only in the event of the AO not able to make a fair substitution of the disallowance figure as contemplated u/s 14A(2) of the Act. In any case, the provisions of the Act would always prevail over the Rules as admittedly the Rules are only subordinate piece of legislation and are meant only to support the Act. Rules could act only as a guiding force to effectively implement the provisions of the Act. If the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account and balance sheet of the assessee and the income computation observed that out of the total assets of the assessee, it has substantial amount of investment in shares from which it had earned considerable dividend income and accordingly sought to invoke the provisions of section 14A of the Act. The Learned AO observed that the assessee had voluntarily made disallowance u/s 14A of the Act to the tune of ₹ 5,92,667/- . He held that the assessee ought to have invoked the provisons of Rule 8D for the purpose of making disallowance u/s 14A of the Act and accordingly arrived at the disallowance u/s 14A figure at ₹ 58,77,703/- as against ₹ 5,92,667/- . Before the Learned CITA, the assessee stated that it had der ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Accordingly, the Learned CITA differed from the view taken by his predecessor on this issue in Asst Year 2009-10 in favour of the assessee wherein consultancy charges paid were meant only for consultancy business of the assessee and not for investment decision with corresponding impact on disallowance u/s 14A of the Act. The Learned AR argued that the Learned CITA on the mistaken understanding of the relevant clause of the agreement supra had held that the assessee had failed to prove that the consultancy fees incurred was wholly and exclusively for earning management consultancy income. He further held that assessee has not maintained any separate details or accounts for the expenditure incurred in respect of such huge vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon expenses could be apportioned between taxable and non taxable income for making disallowance u/s 14A of the Act. In response to this, the Learned DR argued that the disallowance made by the assessee in the return is not in accordance with the statute and is only on an adhoc basis and accordingly prayed for non-interference in the order of the Learned AO. 6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find that the assessee had derived dividend income during the year under appeal to the tune of ₹ 2,24,97,711/- from five mutual funds and from four domestic companies. The Learned AR stated that the investment in shares have been continuing fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and loss account by the assessee. On further appeal by the revenue before this tribunal , the tribunal in ITA No. 635/Kol/2013 dated 29.10.2015 had dismissed the same and upheld the findings of the Learned CITA. 6.1. We find that the total expenses debited to profit and loss account is ₹ 2,28,25,154/- and out of this, direct expenses of consultancy and professional charges amounting to ₹ 1,96,48,885/- for earning consultancy income i.e taxable income would be automatically out of the purview of computing disallowance u/s 14A of the Act. The remaining common expenses of ₹ 31,76,269/- have to be apportioned between taxable and non-taxable income. We find that the ratio of apportionment adopted by the assessee at 45.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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