TMI Blog2015 (3) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... e first round before the tribunal. This ground is, therefore, not allowed. Disallowance u/s 14A - AO was not correct in applying the provisions of Rule 8D for computing disallowance u/s 14A. Our view is fortified by the judgment of Maxopp Investments Ltd. [ 2011 (11) TMI 267 - DELHI HIGH COURT] in which it has been held that the provisions of Rule 8D can apply only from the assessment year 2008-09 and in the earlier periods, the disallowance is required to be made on a reasonable and acceptable method of apportionment. For interest aspect it is vivid from the assessee s balance sheet that total investments at the end of the year stand at ₹ 167.74 crore. The assessee s capital along with reserve and surpluses stand at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not point out any deficiency in computing the base amount of expenses at ₹ 80.23 crore. Apportionment of expenses - CIT(A) was not justified in allocating ₹ 26.21 lac towards exempt income by apportioning such total expenditure of ₹ 80.23 crore in the ratio of dividend income to the total turnover of the company. There can be no comparison between dividend income on the one hand and total turnover on the other, which contains only a part as income. On the contrary, a valid base for apportionment is exempt income to taxable income. As in the case of HT Media Ltd. [ 2015 (8) TMI 708 - ITAT DELHI] has also approved the apportionment of common expenses in the ratio of exempt income to total income. To this extent, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(1). Thereafter, notice u/s 148 was issued on 30.3.2006, pursuant to which assessment was completed u/s 143(3) read with section 147, making addition, inter alia, u/s 14A @ 25% of the exempt income. The assessee challenged the assessment order before the ld. CIT(A), inter alia, against the initiation of reassessment. The ld. CIT(A) vide his order dated 5.2.2008 rejected the assessee s claim of the alleged invalid initiation of reassessment u/s 147. He, however, restricted the disallowance u/s 14A of the Act from 25% to 10% of exempt income. Though, both the assessee as well as the Revenue preferred their respective appeals against the CIT(A) s order, but the Revenue did not challenge the relief allowed by the ld. CIT(A) on section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of ₹ 80.23 crore could be said to have some relation with the exempt income. By apportioning this expenditure of ₹ 80.23 crore in the ratio of Dividend income (₹ 7.43 crore) to the Total turnover of the assessee company (₹ 2269 crore), he sustained the disallowance at ₹ 26,21,424/-. Both sides are in appeal against the impugned order to the extent it is prejudicial to their respective interests. 5. We have heard the rival submissions and perused the relevant material on record. One of the issues in the assessee s appeal is against the error in the jurisdiction of the AO to initiate proceedings u/s 147 in view of the bar contained in the proviso to section 14A of the Act. The ld. AR vehemently argued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view is fortified by the judgment of the Hon ble jurisdictional High Court in the case of Maxopp Investments Ltd. Vs. CIT (2012) 347 ITR 272 (Del) in which it has been held that the provisions of Rule 8D can apply only from the assessment year 2008-09 and in the earlier periods, the disallowance is required to be made on a reasonable and acceptable method of apportionment. 7. It can be seen that the AO has made total disallowance u/s 14A at ₹ 1.43 crore comprising of two amounts, namely, ₹ 79 lac towards interest and ₹ 64 lac towards expenses at % of the average value of investments. 8. In so far as the interest aspect is concerned, it is vivid from the assessee s balance sheet that total investments at the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity and exempt income. Such amount of common expenses was determined by the ld. CIT(A) at ₹ 80.23 crore. The ld. DR could not point out any deficiency in computing the base amount of expenses at ₹ 80.23 crore. 10. As regards the apportionment of expenses, we are satisfied that the ld. CIT(A) was not justified in allocating ₹ 26.21 lac towards exempt income by apportioning such total expenditure of ₹ 80.23 crore in the ratio of dividend income to the total turnover of the company. There can be no comparison between dividend income on the one hand and total turnover on the other, which contains only a part as income. On the contrary, a valid base for apportionment is exempt income to taxable income. The Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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