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TMI Blog2019 (4) TMI 1900X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of Rs. 1.97 crores on account of Administrative and Personnel expenses determined by the Assessing Officer on notional basis, by applying provisions of section 14A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. r.w.r. 8D of the Rules, 1962. 3. The solitary grievance of the Revenue is that the CIT(A) erred in deleting the addition made on account of disallowance of interest u/s 14A of the Act to the extent of Rs. 7.30 crores. 4. Since the underlying facts in issues in both these appeals are common and were heard together, they are being disposed off by this common order for the sake of convenience and brevity. 5. The representatives of both the sides were heard at length and the case records carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees would apply while interpreting Section 14A of the Act or we have to go by the theory of apportionment. We are of the opinion that the dominant purpose for which the investment into shares is made by an assessee may not be relevant. No doubt, the assessee like Maxopp Investment Limited may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business expenditure. Keeping this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has accepted the methodology of calculation of disallowance of interest but he has considered the net worth of investment as deductible amount from the total investment. It is a settled proposition of law that if the assessee has interest free funds available with it, then, it can be safely presumed that investments have been made out of interest free funds available. We, therefore, do not find any merit in the computation of disallowance of interest made by the Assessing Officer. Firstly, the approach of adopting net worth cannot be accepted as interest free available funds available with the assessee should be given set off against the investments and then only the proportionate interest needs to be disallowed as per the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncashment Gratuity 129,744 308,074 21,895,284 Disallowance @ 10% of Rs. 21095264/- 2,189,526 18. The Assessing Officer has computed the disallowance as per Rule 8D of the Rules, which we have already held to be not applicable for the year under consideration. All that has to be considered is whether the disallowance made by the assessee is reasonable qua the facts of the case. In our considered opinion and after considering the computation as mentioned elsewhere, the suo moto disallowance @ 10% is reasonable and cannot be faulted with. We, accordingly, set aside the findings of the CIT(A) and direct the Assessing Officer to accept the suo moto disallowance of Rs. 21,89,526/-. 19. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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