TMI Blog2022 (1) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... unds available with it in the instruments giving raise to exempt income. Hence, this issue is squarely covered in favour of the assessee by the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] - Respectfully following the order of Hon'ble Bombay High Court, we allow this issue of assessee's appeal. Administrative expenses disallowed under Rule 8D(2)(iii) - We noted from the assessment order that the AO has not recorded any subjective satisfaction and the so called satisfaction recorded by the AO is on totally wrong presumption that the assessee has not attributed any expenditure to exempt income, whereas the assessee has disallowed a sum of ₹ 11,85,570/- towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds, which need not be reproduced. 3. Brief facts are that the assessee is the holding company of 'Rane' group of companies and is engaged in the business of providing services to its group companies in the areas of management, information technology, business development and infrastructure. The AO while framing assessment u/s. 143(3) of the Act noticed that the assessee has made investment in equity instruments from where the assessee has earned exempt income in the shape of dividend, etc., and accordingly, he required the assessee to explain as to why disallowance u/s. 14A of the Act read with Rule 8D(2)(ii) regarding interest expenses and under Rule 8D(2)(iii) regarding administrative expenses, be not disallowed. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end received from Rs. In lakhs 01.08.2014 Kar Mobile Limited 22 27.05.2014 Rane Madras Limited 55 28.07.2014 Rane Brake Lining Limited 268 08.08.2014 Rame Madras Limited 325 24.07.2014 Rane TRW Steering System Final Dividend 218 02.02.2015 Rane TRW Steering System Interim Dividend 437 Dividend from sister concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account and other accounts and documents before the AO during scrutiny assessment. Once nexus is not proved always the assessee has to fall back on presumption and presumption is that assessee is having more interest free funds available with it in the shape of Share capital and Reserves and Surplus and once these interest free funds are available with the assessee, the issue is squarely covered by the decision of Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd, 366 ITR 505, wherein it was held that it would have to be presumed that the investment made by assessee would be out of the interest free funds available with the assessee. According to ld. counsel, this issue is covered by the decision of HDFC Bank Ltd., su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has suo-motu disallowed expenses of ₹ 11,85,570/- qua exempt income, then, how he can be satisfied about incurring of expenditure which are relatable to exempt income. 8. We have heard rival contentions and gone through facts and circumstances of the case. Admitted facts are that the assessee has earned dividend income and claimed the same as exempt out of investments made in equity instruments. Admitted facts are that the assessee has more interest free funds available with it in the shape of Share Capital and Reserves and Surplus, which are to the tune of ₹ 283.06 crores as against the investments of ₹ 234 crores. We noted from the assessment order that the AO has recorded the finding that the assessee has not incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- Having regard to the language of section 14A(2) of the Act, read with rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the Assessing Officer needs to record satisfaction that having regard to the kind of the assessee, suo motu disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned the expenditure but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. 10. In view of the above decision we are of the view that this issue is squarely covered in favour of the assessee as the AO failed to record satisfaction for making ..... X X X X Extracts X X X X X X X X Extracts X X X X
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