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TMI Blog2021 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the formula given in Rule 8D cannot be applied only because it results in higher amount of disallowance. 3. The DCIT 5(1)(1) has earned in making disallowance of Rs. 12,436/- u/s 14A of Income Tax Act 1961, read with Rule 8D(2)(i) though the same has been already disallowed while computing the taxable income. 4. The CIT(A)-10 Mumbai erred in partially upholding the order passed by DCIT 5(1)(1)". 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2014-15 declaring total income of Rs. 3,38,66,890/-. The assessee is a private limited company engaged in the business of international freight forwarding. It earned the following exempt income during the impugned assessment year. 1. Income from tax free bonds Rs. 21, 22, 601/- 2. Dividend from equity shares Rs. 3,43,607/- 3. Dividend from mutual funds Rs. 4,39,913/- Total Rs. 29,06,121/- During the course of assessment proceedings, the Assessing Officer (AO) observed that the appellant has suo motu made a disallowance of Rs. 12,436/- on account of payment of DEMAT charges , which is covered by Rule 8D (2) (i) of the Income Tax Rules, 1962 (' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed any funds for making such investments; expenses incurred in respect of earning of exempt income have been already disallowed by the Company, while filing its return of income; such disallowance results in denial of genuine expenses incurred in respect of earning taxable income. 6. On the other hand, the Ld. Departmental Representative (DR) submits that the Ld. CIT (A) has rightly followed the decision in Godrej & Boyce Mfg. Co. Ltd. (supra) and partly allowed the appeal filed by the assessee by giving direction to the AO to rework the average of investment for the purpose of computing the disallowance as per Rule 8D (2) (iii) after excluding the investment in IDFC Super Saver Income Funds - Growth Plan. 7. We have heard the rival submissions and perused the relevant materials available on record. The reasons for our decision are given below:- In assessee's own case for AY 2005-06, the Tribunal has held that: "5. We heard the parties and perused the record. We have also perused the paper book filed by the assessee and we notice that the assessee has incurred aggregate expenses of Rs. 1.17 crores. We further notice that the assessee has made fresh investments in 9 schemes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lower authorities, and are of the considered view that the A.O while dislodging the claim of the assessee that as no part of the expenses debited in the profit and loss account was relatable to earning of the exempt dividend income, thus no disallowance under Sec. 14A was called for in its hands, had failed to record his satisfaction as regards the correctness of such claim, having regard to the accounts of the assessee. Rather, we find that the A.O had dislodged the claim of the assessee that no disallowance under Sec. 14A was liable to be made in its hands by holding a conviction that it was beyond comprehension that no expense incurred by the assessee could be related to earning of exempt dividend income. We are of the considered view that in the backdrop of the judgment of the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC), it was obligatory on the part of the A.O to have recorded his satisfaction, having regard to the accounts of the assessee, as to why the latter claim that no expenditure was attributable to earning of the exempt dividend income was not to be accepted. The Hon'ble Supreme Court while deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be concluded that the mandate of the judgment of the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR449 (SC) had not been satisfied by him. We thus, holding a conviction that as the order passed by the A.O in the case before us is not in conformity with the judgment of the Hon'ble Apex Court in the case of Godrej & Boyce Manufacturing Company (supra), hence the disallowance of Rs. 2,29,151/- made by the A.O cannot be sustained and is liable to be vacated. We thus, set aside the order of the CIT(A) and delete the disallowance of Rs. 2,29,151/- made by the A.O under Sec.14A r.w. Rule 8D. 7.2 In assessee's own case for AY 2011-12, the Tribunal has held that:- "13. We shall first advert to the disallowance of Rs. 4,06,350/- made by the A.O under Sec. 14A r.w. Rule 8D, which thereafter had been sustained by the CIT(A). We have perused the order of the A.O and find that he while dislodging the claim of the assessee that no expenditure debited in the profit & loss account was attributable to earning of the exempt dividend income of Rs. 18,70,574/-, has however failed to arrive at a satisfaction having regard to the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order dated 13.11.2016, the AO has noted that the assessee ought to have made disallowance of expenditure in relation to the income which does not or shall not form part of the total income as required u/s 14A r.w.r. 8D. Further, the AO has observed that the assessee has suo motu disallowed Rs. 12,436/- on account of payment of DEMAT charges, which is covered under Rule 8D (2) (i). Thereafter, as mentioned in para 4.2 of the assessment order, the AO asked the assessee to explain as to why disallowance u/s 14A r.w.r. 8D should not be made in its case. In response to it, the assessee filed an explanation vide letter dated 25.11.2016 stating that all the investments are made on internal accruals and no borrowings were made for making any investments; no administrative expenses were incurred for earning of dividend. Thereafter, the AO has made a disallowance of Rs. 7,58,612/- under Rule 8D(2)(iii). 7.4 Facts being identical in respect of the reasons recorded by the AO as mentioned at para 7.3 above with the AYs 2010-11 and 2011-12, we follow the above order of the Coordinate Bench and set aside the order of the Ld. CIT (A). 8. In the result, the appeal filed by the as ..... 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