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TMI Blog2016 (11) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14Aof the Income Tax Act, 1961 (hereinafter referred to as "the Act") by applying Rule 8D of the Income Tax Rules, 1962. 3. The facts apropos to the issue are that the assessee is engaged in the business of few training and software sales. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has earned dividend income of Rs. 2,10,000/- from mutual fund which is exempt from tax. 3.1. It was also noted by the AO that the assessee holds investment in mutual funds of Rs. 2,30,78,589/- as on 31/033/2009 while the corresponding investment as on 31/03/2008 stands at Rs. 3,13,87,847/-. The AO found that the assessee has claimed interest expenditure amounting to Rs. 13,050/- which is allowable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIP plan is in place. The Ld.AR further submitted that mutual funds Managers are deducting their fund management charges from the said mutual investments made. Thus, in the given facts, no further disallowance is called for. 9. The Ld.DR, on the other hand, relied on the order of the CIT(A). 10. We have carefully considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. The solitary issue in the present appeal is disallowance of certain expenditure by resorting to section 14A of the Act. We find that averment made on behalf of the assessee that the own capital together with reserves held by the assessee are in excess of corresponding investment is supported by the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we do not find it a fit case for resorting to double disallowance of the similar expenditure in the garb of Rule 8D(iii) of the IT Rules. It will be pertinent to note that a bare reading of section 14A of the Act suggests that its applicability is not automatic. It is hedged by conditions prescribed therein. Section 14A inheres in it the concept of reasonableness. The formidable amount of expenditure as computed by the AO cannot be said to be attributable to tax-free income by applying a straight jacket formula as per Rule 8D(2)(iii) of the IT Rules in the given facts. Thus, we find considerable merit in the plea of the assessee. Hence, we are disposed to adjudicate the issue in favour of the assessee. Thus, order of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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