TMI Blog2019 (7) TMI 1601X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) on this issue - no disallowance of interest expenditure is attracted in this case. So far as the administrative expenses are concerned none of the lower authorities have pointed out any defect in the computation of proportionate disallowance computed by the assessee except that certain part of the administrative expenses were not taken into consideration which has been taken into consideration in the computation made above. Even the assessee has claimed that it has not incurred any administrative expenses for earning of tax exempt income. The Assessing Officer in this respect has not recorded any dissatisfaction taking into consideration the accounts of the assessee. The Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing Co [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that under section 14A of the Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 (in short 'the Act'). Act. On being asked to explain as to why disallowance u/s 14A be not computed as per the norms prescribed under Rule 8D of the Income Tax Rule 1962, the assessee submitted that it had not incurred any expenditure to earn the tax exempt dividend income. That the investments made during the year as well as in earlier years were from current accruals, reserves and surpluses available with the assessee company. Even the assessee did not incur any administrative expenses, however, the assessee suo motu computed the disallowance on proportionate basis taking into consideration the total income of the year, the total amount of dividend income earned and total amount of administrative expenses incurred. The assessee in this respect furnished the following computation of the administrative expenses. Disallowance u/s 14-A, In case of regular computation 1.Amount of Dividend income 1,06,56,014/- 2. Operating income 6,33,68,64,325/- 3. % of dividend income 0,00,168/- 4. Amount of expenses out of administrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest free funds available to meet the investment, a presumption would arise that investment had been made out of the interest free funds generated or available with the company, therefore, no interest disallowance was attracted. It was also pleaded that the assessee had not incurred any expenses out of the administrative expenditure for the investment yielding dividend income. That the assessee made suo motu disallowance of administrative expenses incurred vis-a-vis total income earned by the assessee. However, the Ld. CIT(A) did not agree with the above contention of the assessee and upheld the disallowance made by the Assessing Officer. 5. Before us, the Ld. Counsel for the assessee has submitted a chart to show that the assessee was having sufficient interest free own funds in the shape of capital, reserves surplus and cash accrual to meet the investments in question. A perusal of the said chart revels that the total capital reserves and surplus of the assessee during the financial year under consideration 2009-10 were at ₹ 19405.71 lacs and the total cash accruals of the assessee during the year were at ₹ 11071.90 lacs. The total investment during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation of proportionate disallowance computed by the assessee except that certain part of the administrative expenses were not taken into consideration which has been taken into consideration in the computation made above. Even the assessee has claimed that it has not incurred any administrative expenses for earning of tax exempt income. The Assessing Officer in this respect has not recorded any dissatisfaction taking into consideration the accounts of the assessee. The Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. 328 ITR 81 has held that under section 14A of the Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Sub section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of such expenditure is correct. The sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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