TMI Blog2017 (5) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of expenditure incurred in relation to income which does not form part of the total income having regards to the accounts of the assessee before the AO and injustice caused to the assessee by invocation of Rule 8D of the 1962 Rules r.w.s. 14A of the 1961 Act can be removed Keeping in view facts and circumstances of the case, in our considered view the matter needs to be set aside and restored to the file of AO for re-computing the disallowance u/s. 14A of the 1961 Act of the expenditure incurred in relation to the earning of income which does not form part of the total income having regards to the accounts of the assessee. Appeal filed by the assessee allowed for statistical purposes. - ITA No./6446/Mum/2014 - - - Dated:- 17-5-2017 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 54,83,240/- was earned by the assessee which was claimed exempt by the assessee. The assessee was asked by the AO to furnish details of expenses incurred in relation to the said income. Further, the assessee was asked to explain as to why disallowance u/s. 14A r.w.Rule 8D should not be made considering the claim of exempt income. The assessee in reply submitted that capital and reserves as well as income earned during the year had no other application except investment in subsidiaries companies and mutual funds. It was also submitted that there were no borrowings made and also the assessee had not incurred any interest expenditure. It was submitted that all the expenses incurred by the assessee were mainly administrative in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Godrej Boyce Mfg.Ltd.(328 ITR 81). The AO made disallowance @0.5% of average value of investment u/r 8D(2)(iii) of the 1962 Rules read with Section 14A of the 1961 Act wherein disallowance of ₹ 6,67,769/- was confirmed. The assessee was allowed credit by the AO of suo-motu disallowance of ₹ 1,09,665/- made u/s 14A of the 1961 Act and difference of ₹ 5,58,104/- was added to income and brought to tax under Rule 8D(2)(iii) of the 1962 Rules r.w.s. 14A of the 1961 Act., vide assessment order dated 25-03-2013 passed by the AO u/s 143(3) of the 1961 Act. 5. Being aggrieved by the assessment order dated 25-03-2013 passed by the AO u/s 143(3) of the 1961 Act, the assessee filed an appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order dated 25-03-2013 by invoking Rule 8D(2)(iii) of the 1962 Rules read with Section 14A of the 1961 Act was confirmed by learned CIT(A), vide appellate order dated 03-07-2014 passed by the learned CIT(A). 6.Aggrieved by the appellate order dated 03-07-2014 passed by learned CIT(A), the assessee filed an appeal before the Tribunal. 7. At the outset it was submitted by the learned Authorised Representative (AR) of the assessee that this matter needs to be restored back to the file of the AO as the AO has not properly appreciated the suo moto disallowance of ₹ 1,09,665/- made by the assessee u/s.14A of the Act. It was submitted if the matter is restored to the file of the AO, then the assessee will duly explain the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D(2)(iii) of the 1962 Rules read with Section 14A of the 1961 Act. Section 14A of the Act which was introduced by Finance Act, 2001 with retrospective effect from 01.04.1962 clearly stipulates that for the purpose of computing total income, no deduction will be allowed of the expenditure incurred in relation to earning of income which does not form part of total income and which is claimed as exempt by the tax-payer. The assessee has earned dividend income of ₹ 54,83,240/- which is claimed as an exempt by the assessee. As per section 14A of the Act where any expenditure is incurred by the assessee in relation to the income which is not includible in total income of the assessee, such expenses shall not be allowed as expenditure. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure suo motu offered by the assessee being incurred in relation to earning of income which does not form part of the total income having regards to the accounts of the assessee if the same could not be worked out from the manner in which accounts are made by the assessee, the Assessing Officer can invoke Rule 8D of the 1962 Rules r.w.s. 14A of the 1961 Act and apply method prescribed u/r 8D of the 1962 Rules for making disallowance of expenditure incurred in relation to earning of income which does not form part of the total income. We are of the considered view that the assessee did offer the suo motu disallowance but did not relate the same to the accounts of the assessee as is contemplated u/s 14A(2) of the 1961 Act and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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