TMI Blog2017 (9) TMI 1406X X X X Extracts X X X X X X X X Extracts X X X X ..... confirm the disallowance under Rule 8D(2)(iii) of the Income Tax Rules without considering the working/computation offered by the assessee and also without ignoring the nature of investments made by the assessee. The order of the Ld. CIT(A) confirmed the disallowance under Rule 8D(2)(iii) is therefore set aside. Appeal of Revenue is dismissed. - ITA No. 5582/Mum/2015 - - - Dated:- 20-9-2017 - Sri Mahavir Singh, JM And Sri N. K. Pradhan, AM Revenue by : Shri Saurabhkumar Rai, DR Assessee by : Shri Mahesh O Rajora, AR ORDER Per Mahavir Singh, JM This appeal by the Revenue is arising out of the order of CIT(A)-2 Mumbai, in appeal No. CIT(A)-2/IT/69/2012-13, dated 28-08-2015. The Assessment was framed by DCIT Circle 1( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it has not incurred any interest expenditure towards earning of exempt income and therefore, there is no direct nexus between the expenses incurred and the exempt income. The AO did not accept the explanation of the assessee and directly applied rule 8D(2)(ii) (iii) of the Rules and made disallowance of ₹ 39,74,231/- and ₹ 24,82, 882/- under the respective rules in total to ₹ 64,57,113/- as against the suo moto disallowance made by the assessee at ₹ 5,00,000/-. Aggrieved, assessee preferred the appeal before CIT(A) who relying on ITAT decision in assessee s own case for AY 2009-10 and 2008-09 allowed the claim of the assessee by observing in Para 3.6 as under: - 3.6, I find that there is no change in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made to Rule 8D of the Income Tax Rules, if the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of the AO has to be arrived at having regard to the accounts of the assessee. Sub section 2(14) does not ipso-facto enable the AO to apply the method prescribed by the rules straightway without considering whether the claim made by the assessee in respect of such expenditure is correct. The satisfaction of the AO must be arrived at on an objective basis. A perusal of the assessment order under consideration reveals that the AO has failed to follow the guidelines of objective satisfaction as laid down by the Hon ble Bombay High Court in the case of Godrej Boyce Manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was used by the assessee for making investments. However, after considering the overall facts and circumstances and the explanation of the assessee regarding the utilization of the loan amount and also considering that there is sufficient increase in own/surplus funds of the assessee and there being no decrease in the loan liability and also considering the quantum of investment made in relation to reserve and surplus fund available, we do not find any infirmity in the order of the Ld. CIT(A) while deleting the disallowance on account of indirect expenditure under Rule 8D(2) of the Act. We further find that most of the investments made by the assessee during the year are in mutual funds which do not require any specific incurring of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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