TMI Blog2017 (8) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... istrative expenses under Rule 8D(2)(iii), we find that the assessee on her own had disallowed a sum of ₹ 5 lacs in the return of income out of total administrative expenses of ₹ 40,73,576/-. AO had not given any satisfaction as to how the said disallowance made by the assessee is incorrect having regard to the accounts of the assessee in terms of Section 14A(2) read with Rule 8D(1) of the Rules. Thus without doing the same, the Ld.AO cannot mechanically resort to Rule 8D of the Rules and in the instant case, the disallowance made by the assessee in the sum of ₹ 5 lacs is reasonable having regard to the accounts of the assessee and accordingly, the Ld. CIT(A) had rightly deleted the further disallowance made by the Ld. AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 4,77,417/- and claimed the same as exempt from total income. Accordingly, the Ld. AO sought to invoke the provisions of Section 14A of the Act read with Rule 8D of the Rules. The assessee submitted that it had sufficient own funds and that the borrowed funds were used only for the purpose of her business, and no part of the borrowed funds were utilized for making investments. Accordingly, no disallowance could be made towards investment in terms of Rule 8D(2)(ii) of the Rules. With regard to the disallowance to be made under the third limb of Rule 8D(2), it was submitted that the assessee had debited total sum of ₹ 40,73,576/- as common expenses in her profit and loss account and from that, the assessee herself voluntarily had al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend income of ₹ 1,69,63,044/- interest of ₹ 4,77,417/- from PPF which are exempt income. (iii) The Ld. CIT(A) has ignored the fact that the AO has rightly calculated the disallowance u/s 14A read with Rule 8D. Since, the expenditure debited in the profit and loss account was ₹ 40,73,576/-. The AO restricted the amount at ₹ 39,73,576/- allowing an estimated expense of ₹ 1 lakh in favour of the assessee. 5. The Ld. DR vehemently relied on the order of the ld. AO and argued with the Ld. CIT(A) ought not to have agreed to the interest netting (positive interest income) and deleted the disallowance made under second limb of Rule 8D(2). 6. We have heard the rival submission and we find that primary arg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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