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TMI Blog2019 (4) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the learned Counsel for the parties, the Appeal is taken up for final disposal forthwith. 3. This Appeal is filed by the Assessee to challenge the Judgment of the Income Tax Appellate Tribunal ('the Tribunal', for short). The Appellant Assessee is a private limited company and a nonbanking financial company. In the Assessment Year 20082009, the Assessee had claimed interest expenditure of Rs. 6,87,57,951. During the same period relevant to the Assessment Year in question, the Assessee had earned dividend income of Rs. 1,13,72,545/which was exempt from tax. The Assessing Officer disallowed the interest expenditure of Rs. 3,79,83,539/. He further disallowed administrative expenditure and made a total disallowance of Rs. 4,22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was observed as under. "14. We make it clear that the expenditure for earning exempted income has to have a reasonable proportion to the income, so earned, going by the common financial prudence. Therefore, even if the Assessing Authority has to make an estimate of such an expenditure incurred to earn exempted income, it has to have a rational nexus with the amount of income earned itself. Disallowance under Section 14A of Rs. 2,48,85,000/as expenses to earn exempted Dividend income of Rs. 1,80,30,965/is per se absurd and hypothetical. The disallowance under Section 8D cannot exceed the expenses claimed by assessee under the Proviso to Rule 8D. Therefore, where the assessee claimed that assessee did not incur any such expenditure during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under : "7. We do not find any merit in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not a case where the assessee had earned no income which was exempt from tax. However, in our opinion, the ratio of the above noted decisions in the cases of Cheminvest Ltd. and Holcim India (P) Ltd. (supra) would include a facet where the assessee's income exempt from tax is not NIL but has earned exempt income which is larger than the expenditure incurred by the assessee in order to earn such income. In such a situation that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. We do not find any error in the view of the Tribunal. We record that the assessee had offered voluntary disallowance of expenditure of Rs. 1.30 crores, which is not been disturbed by the Tribunal. 5. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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