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TMI Blog2012 (5) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of ₹ 1,02,02,669/- made by the Assessing Officer u/s.14A of the Act, to the extent of ₹ 81,19,544/-." 2. The brief facts of the case are that the case of the assessee was picked up for scrutiny and the assessment order was passed on 27-12-2010 u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2008-09. During the course of assessment proceedings, the Assessing Officer observed that the assessee-company had earned dividend income of ₹ 1,75,92,106/- claimed as exempt income u/s. 10(33) of the Act. He further observed that the assessee incurred interest expenditure of ₹ 4,86,11,489/- and the average investment stood at ₹ 39,73,64,901/-. Therefore, finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of applying Rule 8D does not arise. More so, as per Rule 8D if the assessing officer does not satisfy about the genuineness of the investment made by the assessee then only Rule 8D has to be applied. In our case nexus is clearly proved between the investment and proceeds of the public issue and therefore we are sure that your good office shall satisfy about the utilization of public issue fund for investment in mutual funds for a temporary period from enclosure-1 above and therefore the question of applying Rule 8D does not arise. However, a statement showing working as per Rule 8D as asked by you is enclosed as Encosue-2 (age No.2) without prejudicing the fact that the Rule 8D is not applicable inn our case. The same is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Godrej and Boyce Mfg. Co. Ltd. v. DCIT in ITA No. 626 & WP 758 of 2010 dated 12-08-2010. The assessee further relied in the case of CIT v. Hero Cycles 323 ITR 158 (P & H) passed by Hon'ble Punjab and Haryana High Court. The assessee also relied upon the order of ITAT Delhi in the case of Minda Investment Ltd. v. DCIT in ITA No.4046/Del/2009. The assessee also relied upon the order passed by ITAT Delhi in the case of DCIT v. Maharashtra Seamless Ltd. in ITA No.4063/Del/2006. The assessee also relied upon in the case of Jindal Photo Ltd. v. DCIT passed by the ITAT Delhi in ITA No. 4539/Del/2010. Ld. CIT(A) after considering the submissions made by Ld. Counsel for the assessee partly allowed the appeal of the assessee. The relevant contents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 14A r.w. Rule 8D can be done. There is no doubt that with introduction of Rule 8D, the Assessing Officer need not establish the nexus with the interest bearing fund and the investment made to earn exempt income. However, in this case, the appellant has clearly established that no interest bearing fund has been invested and, therefore, no disallowance on account of interest u/s. 14A can be made in the case of the appellant. The appellant has also rightly relied on the decisions of CIT Vs. Here Cycles [323 ITR 158, P & H] and Minda Investment Ltd. Vs. DCIT [ITA No.4046/Del/2009], IUTAT, New Delhi order dated 13/10/2010. Accordingly, the addition of ₹ 81,19,544/- is directed to be deleted. The A.O has also made disallowance on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest bearing fund is invested into mutual fund which has earned exempt income. The Ld. CIT(A) also observed that the assessee-company clearly established that no interest bearing funds has been invested and therefore no disallowance on account of interest u/s14A of the Act can be made. We find that Assessing Officer has observed that the assessee-company had earned dividend income of ₹ 1,75,92,106/- claimed as exempt income u/s. 10(33) of the Act. He further observed that the assessee incurred interest expenditure of ₹ 4,86,11,489/- and the average investment stood at ₹ 39,73,64,901. It is settled position of law that the Rule 8D of the Income Tax Rules, 1962 would apply for the Assessment Year 2008-09 Rule 8D is reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. (3) For the purposes of this rule, the "total assets" shall mean, total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets.] The stand of the assessee company is that no interest bearing fund was applied in earning of exempt. It is eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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