TMI Blog2019 (7) TMI 1953X X X X Extracts X X X X X X X X Extracts X X X X ..... BER AND SHRI O.P. KANT, ACCOUNTANT MEMBER Appellant by : Shri Ashok Khandelwal, CA Respondent by : Shri Ashima Neb, Sr.DR ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 03/10/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-35, New Delhi [in short the Ld. CIT(A) ] for assessment year 2013-14, raising the ground as under: 1. Action of the CIT(A) in confirming the action of A.O. in making a disallowance of Rs.6,05,176/- u/s 14A of Income Tax Act, 1961 as expenses for earning dividend is unjust, illegal, arbitrary and against the facts and circumstances of the case. 2. Briefly stated facts of the case are that the assessee was engaged in the business of autom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made only in respect of sub rule (2)(iii) for administrative expenses and thus the argument of Ld. counsel that own funds have been utilized for purchase of shares, is no longer relevant. He further submitted that the argument of the Ld. counsel for not making any disallowance under section 14A of the Act in respect of strategic investment in subsidiaries, he submitted that decisions relied upon by the Ld. counsel are no longer valid after the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT, 402 ITR 640 (SC). 5. We have heard the rival submissions and perused the relevant material on record. The assessee shown dividend income of Rs.12,92,735/- on account of investment in shares and securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening value of the Asset 3,55,66,43,527 Closing value of the Asset 4,72,23,40,603 C Average value of the Asset 4,13,94,92,065 Disallowance u/s 14A of the I.T. Act, 1961 (i + ii -t-iii) 6,05,176 5.1 It is evident that the Assessing Officer has not made any disallowance towards interest and only disallowance has been made at the rate of 0.5% of the average investment which is to cover the administrative expenses incurred by the assessee . 5.2 The Ld. CIT(A) has recorded that the assessee made suomoto disallowance of Rs.1,29,274/- to avoid controver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer in assessment year 2001 -02 wherein the disallowance, was deleted by the Tribunal in assessee s own case in similar circumstances. That order of the Tribunal is in ITA No.38/Del/2007 dated 31.5.2007 wherein the Tribunal has deleted the addition by observing inv paragraph 5 as under: 5. We have heard both the parties and perused the material available on record. The assessee has earned dividend income of Rs.35,07,915/- which is exempt under section 10 (33) of the Act. Under section 14A any expenditure inclined for earning exempted income will be disallowed. The assessee has not maintained investment division for investment of funds and monitoring the income from exempted sources. The Assessing Officer has not brought any mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow the method prescribed for computing the disallowance under section 14A of the Act. The said method prescribed has been held to be effective prospectively from assessment year 2008-09 by the Hon ble Delhi High Court in the case of Maxopp Investment Ltd reported in 247 CTR 162 (Delhi). 5.5 Since the decisions relied upon by the assessee relate to assessment year 2004-05, which is prior to the assessment year 2008-09, the ratio of the said decision cannot be imported into the facts of the instant year. 5.6 The Ld. counsel submitted that no disallowance under section 14A read with Rule 8D can be made in case of strategic investment in shares of the company, which was for not earning exempt, income could be made. In support he reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share and Stock Brokers P Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom. The next phrase is, in relation to income which does not form part of total income under the Act . It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A.. xxx xxx xxx The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14 A. 35. The Delhi High Court, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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