TMI Blog2021 (1) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonnel.AO was not satisfied with the aforesaid disallowance since the assessee would have incurred expenditure under other heads as well. Assessee has identified the composite expenditure under each head and apportioned the composite expenditure in the ratio of exempt income vis- -vis total receipts during the year. The employee cost has separately been apportioned on the basis of time devoted by certain employees which could be said to have been engaged in investment activities. Upon perusal of the same, we find that this method of computing the disallowance was very fair, reasonable and scientific and therefore, was to be accepted. As per the provisions of Sec.14A, disallowance has to be computed having regards to the accounts of the assessee and if the said method adopted by the assessee was found to be not satisfactory, only then the computation was to be done as per Rule 8D. Therefore, we are of the considered opinion that the computations made by assessee to identify the disallowance was quite fair and reasonable. Disallowance u/r 8D(2)(iii) is accepted at ₹ 24.50 Lacs - Since the assessee has already disallowed a sum of ₹ 16,51,524/- in its computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is to be noted that Rule 8D is applicable for the year under consideration therefore, the disallowance of administrative expenses has to be computed as per the formula provided in Rule 8D. However, the disallowance worked out under Rule 8D cannot exceed the total expenditure claimed by the assessee which can be apportioned to the exempt income. Thus we set aside this issue to the record of AO for the limited purpose of computing the total expenditure incurred by the assessee for the composite/indivisible activities in which taxable and non-taxable income is received and if the disallowance work out under Rule 8D on account of administrative expenses exceeds the total claim of expenditure incurred for the composite activities resulting taxable or non-taxable income then the disallowance should be restricted to the said actual total claim of expenditure. 6. Consistent with the view taken by the coordinate bench, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for considering the issue afresh by duly considering all the types of contentions that may be raised and all the materials that may be produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld justify the disallowance of proportionate salary and small amount of overheads. It was submitted that no other expenditure was incurred to maintain the investments and hence, the suo-moto disallowance was to be accepted. The perusal of computation of income would show that the assessee has earned exempt dividend income of ₹ 1146.37 Lacs during the year. 3.2 However, Ld.AO opined that the apportionment of expenditure could not be established by the assessee and hence, the disallowance was to be computed as per Rule 8D only. For maintaining investment systemic monitoring was inevitable which would entail incurrence of common expenses such as motor vehicle, travelling, legal-professional charges etc. Therefore, the disallowance was computed at ₹ 125.67 Lacs, being 0.5% of average investments of ₹ 251.35 Crores held by the assessee during the year. After adjusting suo-moto disallowance of ₹ 16.51 Lacs as offered by the assessee in its computation of income, the differential amount of ₹ 109.16 Lacs was further added to the income of the assessee. 4. Upon further appeal, following the decision of Hon ble Bombay High Court in Pr.CIT V/s Ballarpur in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rent 12.18 Postage, telephone, telegram telex 3,83 Printing Stationery 2.00 Amortization for diminution in investment value of ₹0.76 crores** Miscellaneous expenses 13.62 Total expenses related to composite activities (e) 31.63 Total expenses debited to profit and loss account (f) =(d)+(e) 2,788.20 Disallowance Under section 14A Composite expenses apportioned to exempt income: (g) = (e) * (b)/ (c ) [₹31.63x ₹10.02/ ₹3054.60] 0.1037 Employee cost apportioned to exempt income as per return of income: (h) 0.1413 Total expenses appointable to exempt income: (i) = (g) + (h) [₹0.1037 + ₹0.1413] 0.2450 Revenue Amount (in crores) Taxable receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omposite activities Rent 12.18 Postage, telephone, telegram telex 3.83 Printing stationery 2.00 Amortization for diminution in investment value of ₹0.76 crores** 0.76 Miscellaneous expenses 13.62 Total expenses related to composite activities (e) 32.38 Total expenses debited to profit and loss account (f) 2788.96 From the perusal of above computations, it is quite evident that the assessee has identified the composite expenditure under each head and apportioned the composite expenditure in the ratio of exempt income vis- -vis total receipts during the year. The employee cost has separately been apportioned on the basis of time devoted by certain employees which could be said to have been engaged in investment activities. Upon perusal of the same, we find that this method of computing the disallowance was very fair, reasonable and scie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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