TMI Blog2016 (2) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... w. Rule 8D(2)(iii) cannot exceed to the allocable expenses incurred by the assessee for a composite activity resulting taxable and exempt income. The working of disallowance under Rule 8D(2)(iii) by the AO clearly shows that it exceeds not only the expenses debited and claimed by the assessee which could have a proximate nexus with the earning of exempt income but also to the total expenditure debited by the assessee in the P&L account under the head administrative and other expenses. It turns out to be contradictory to the actual facts and gives absured results in complete disregard to the scheme of disallowance u/s 14A. Accordingly, we delete the disallowance made by the Assessing Officer. - Decided in favour of assessee. - I.T.A. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance as per Section u/s 14A of the Act read with rule 8D(2)(iii) of the Income Tax Rules. In response thereof the appellant submitted that the company had disallowed ₹ 25,000/- on account of administrative expenses in its computation of income. It was further submitted that direct expenses of ₹ 62,660/- on account of demat charges could not be considered at the time of filing of return and hence the total disallowance worked out to ₹ 87,660/-. Without prejudice, it was further submitted that maximum disallowance under Rule 8D(2)(iii) may be restricted to the administrative expenses debited to Profit Loss a/c amounting to ₹ 8,66,256/-. The AO did not accept the contention the assessee and after allowing set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D(2)(iii) at ₹ 20,86,230/- which shows that the working under the provisions of Rule 8D negates the actual total expenditure debited by the assessee in the P L account on administrative and other expenses. In any case, disallowance cannot be made more than the total expenses debited to the P L Account. From the details of the expenses, it is clear that most of the expenses are specific in nature and exclusively incurred for the business activity of the assessee. Therefore, the expenses on account of auditor fee, legal and professional fees, profession tax, business support fees cannot be said to have any direct or proximate nexus with the activity of investment or earning the exempt income. Thus the disallowance u/s 14A can be made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and proper. Accordingly, we delete the disallowance made by the Assessing Officer. 3.1 The aforesaid decision of Mumbai Tribunal was further followed by C Bench of the Mumbai Tribunal in Capstan Trading Pvt. Ltd. vs. ACIT, Mumbai ITA 4088/M/12, Palm Shelter Estate Development Pvt. Ltd. vs. ACIT, Mumbai ITA 4089/M/12 Casa Maria Properties Pvt. Ltd. vs. ACIT, Mumbai ITA 4091/M/13 and all the three appeals filled by assessee were allowed. 3.2 In the case before us, the only grievance of the assessee is that the CIT(A) has wrongly upheld the disallowance of administrative expenses made by the AO on investment in shares holding that the entire administrative expenses was incurred by the assessee for the purpose of investment in shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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