TMI Blog2018 (12) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Niraj D. Sheth, AR ORDER PER MAHAVIR SINGH, JM: This appeal of the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-13, Mumbai [in short CIT(A)], in appeal No. CIT(A)-13/DCIT-7(2)(2)/930/2015-16, dated 24.01.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle-7(1), Mumbai (in short DCIT/ AO ) for the A.Y. 2010-11 vide order dated 15.03.2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter the Act ). 2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance of expenses made by AO by invoking the provisions of section 14A of the Act read with Rule 8D(2)(iii) of the Income Tax Rules, 1962 (hereinafter the Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. for administrative expenses and computed the amount of disallowance at ₹ 81,66,640/-. Thereby the differential amount of ₹ 69,36,640/-, after considering the suo moto disallowance made by assessee, added to the returned of income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who deleted the disallowance by following assessee s own case for AY 2011-12 i.e. the future assessment year. Aggrieved, Revenue is in appeal before us. 4. Before us, the learned Sr. Departmental Representative, heavily relied on the assessment order and the learned Counsel for the assessee drew our attention to Tribunal order in assessee s own case for AY 2009-10 in ITA No. 2726,2727 2729/Mum/2013 vide order dated 23.07.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one half of the book value of investments (yielding tax-exempt income), as at the beginning and the close of the year. The ld. CIT(A) has observed of substantial activity, even as mere holding of investment, as where in stocks and shares, subject to market volatility in response to various economic macro and micro, factors, may require decision making at, and thus involvement, of the higher management, entailing incurring cost. In fact, as we observe, there is not much difference between the opening and the closing value of the investment and, two, the bulk of the tax exempt income arising by way of interest on tax-free bonds. The Revenue, in our view, ought to have required the assessee to substantiate its claim of the working of suo mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of the salary of top management and 20?% of the cost of theallocable salary in terms of section 14A of the Income tax Act, 1961-a detailed computation of how the Appellant arrived at the disallowance so made is given hereunder: Salary cost (of top management) Actuals in Rs. Rounded off Rs. In Lakhs Gagan Rai (Managing Director and CEO) 1,20,58,400.00 120.58 T.Koshy (Executive Director) 43,56,355.00 43.56 Hiten Mehta (Vice President) 23,17,077.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,684.82 Ratio of Overheads to staff 18.43 (say20%) (679.29/3694.82*100) Overhead Cost (205.09*20%) B 41.02 Total (A+B) 246.11 Disallowance U/s 14A @ 5% of total 12.31 Amount Disallowed: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of salary of top management and 20% cost of allocable salary. It was also explained that 20% of overhead as having been expanded for earning this tax free income, no further disallowance is to be required. We have considered these issues and fact that the AO has nowhere recorded the satisfaction as to why he is rejecting the computation of disallowance made by the assessee. This issue has been deliberated by Hon ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018] 402 ITR 640 (SC), held as under: - 41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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