TMI Blog2018 (3) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of expense has been attributed and the nature of tax free income is such against which expenses cannot be calculated except by resorting to Rule 8D. Disallowance of expenses related to tax free income made by the appellant is ₹ 2,62,459/- which is about 25% of the tax free income of ₹ 10,76,533/-. Find the expense already disallowed as sufficient to cover the requirement of Section 14A and Rule 8D. The ground of appeal is allowed. - Decided against revenue. - ITA No. 2681/Del/2016 Assessment Year: 2012-13 - - - Dated:- 19-3-2018 - Ms. Diva Singh And Shri B.R.R.KUMAR, JJ. Appellant by Sh. Kaushlendra Tiwari, Sr.DR Respondent by Sh.R.S.Singhvi And Sh. Satyajit Goel ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been consistently held by different Courts deserves to be upheld. Accordingly, heavy reliance was placed upon the impugned order. 4. We have heard the rival submissions and perused the material available on record. The relevant facts of the case are that the assessee is engaged in the business of development of land and construction of properties etc. with its associate companies. The assessing officer in the course of the scrutiny proceedings required the assessee to file the details of expenses incurred related to the earning of dividend income of ₹ 10,76,583/-. The explanation filed was not accepted by the AO. The assessee carried the issue in appeal before the First Appellate Authority. The submissions made before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as under : 4.2 I have given careful consideration to the contention of the appellant and it is relevant that in Maxopp Investment Ltd. vs. Commissioner of Income Tax [2012] 347 ITR 272 (Del) and Godrej Boyce Mfg. Co. Ltd. vs. CIT [2010] 328 ITR 81 (Bom.), it has been held that under sub Section (2) to Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assessing Officer can determine the amount of expenditure which should be disallowed in accordance with such method as prescribed, i.e. Rule 8D of the Rules. Therefore, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. Therefore, the argument about the non-recording of satisfaction about the incurring of expenses in relation to exempt income was not tenable. In this background the recording of satisfaction can be undertaken by CIT(A), and on appreciation of the facts of the present case when the tax free income is only ₹ 6,84,337/- and by applying Rule 8D(2), disallowance of ₹ 43,67,640 works out primarily due to application of sub-rule (ii) in respect of interest thus it is imperative to examine the justification of the same. In Joint Investments Pvt. Ltd. .v. CIT( 2015) 372 ITR 6947 275 CTR 4717 116 DTR 289(Delhi)(HC), it was held that u/s 14A of the Income Tax Act the disallowance of expenditure against exempt income can be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would apply. Under clause (ii) to Rule 8D(2) of the Rules, the Assessing Officer is required to examine whether the assessee has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt. In case the interest paid was directly attributable to any particular income or receipt, then the interest on loan amount to this extent or in entirety as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii). Clause (i) relates to direct expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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