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TMI Blog2021 (3) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer in disallowing Rs. 2105899/- under Section 14A of the Act as against amount of Rs. 17500/- already made in returned income and thus there is further disallowance of Rs. 2088399/- 2. Without prejudice to above, learned CIT(A) has not given any finding on the computation of disallowance under Rule 8D of the Income Tax Rules provided at Rs. 210590/- before CIT(A) during the appellate proceeding as against disallowance of Rs. 2105899/- computed by the assessing officer. 3. The impugned disallowance is arbitrarily, unlawful, unjustified and against facts and record of the case. 4. That the appellant craves the leave to add, modify, amend or delete the grounds of appeal at the time of hearing. 2. The facts in brief of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to decide the appeal. 4. The facts in brief in issue is that the assesee earned dividend income of Rs. 3,49,926/- and against the said dividend income, the assessee disallowed a sum of Rs. 17,500/- under Section 14A of the Act. The suo motu disallowance by the assessee was on estimate of 5% of the dividend income earned. The Assessing Officer being dissatisfied with the correctness of the claim of disallowance made by the assessee, show-caused to the asessee, as to why the Rule 8D of the Income Tax Rules, 1962 (in short 'the Rules') might not be invoked. The assessee contended that the investment in shares was made for strategic purpose in the sister concerns with no motive of earning dividend income. The learned Assessing Officer reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance u/s 14A and Rule 8D at Rs, 21,05,899/-. The objection raised by appellant that AO has not recorded any objective satisfaction in regard to the correctness of claim of the assessee has no force as recently in the case India Bulls Financial Services Ltd. Vs. DCIT 395 ITR 242, Hon'ble Jurisdictional Court has held that if the AO has carried elaborate analysis out of facts and the issue but did not expressly record his dissatisfaction, would not per say justify that he was not satisfied or did not record cogent reasons for his dissatisfaction. It has been further held by Hon'ble Court to insist that the AO should pay such lip service regardless of substantial compliance with a provision would, in fact, destroy the mandate S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of Rs. 17,500/- made by appellant against the exempt income earned by it. The appellant itself is not sure of disallowance made by it as during the appellate proceedings, it has worked out the disallowance at 2,10,590/- against the disallowance of Rs. 17,500/- made by it in the computation of income. In such situation, the AO was justified in computing the disallowance as per Rule 8D of the Act after analyzing the amounts of investments made by appellant, exempt income shown and expenses claimed against it by appellant. The AO has also applied the legal provisions to the situation and also the Circular issued by the CBDT, New Delhi in this regard which is mandatory on his part. In view of this, I uphold the disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced as under: "34. Having clarified the aforesaid position, the first and foremost issue that falls for consideration is as to whether the dominant purpose test, which is pressed into service by the 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 expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has not only inserted Section 14A by the Finance (Amendment) Act, 2001 but also made it retrospective, i.e., 1962 when the Income Tax Act itself came into force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to accept the opinion of Punjab & Haryana High Court which went by dominant purpose theory. The aforesaid reasoning would be app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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