2012 (9) TMI 153

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....rom RBI tax free bonds. ii) That the Ld CIT(A) has erred in law and facts while confirming the addition of Rs.300.000 u/s 14A on an ad hoc and arbitrary basis u/s14A which is highly unjustified and against the natural course of justice and against the facts of the case. iii) That the findings of the Ld CIT(A)-XV are bad in law, vague and without any documentary evidence brought in by him on record while assuming the ad hoc expenditure of Rs.300,000/- on the exempt dividend and interest income from shares and mutual funds & RBI tax free bonds. iv) That the findings of the Ld CIT(A) while confirming an addition of Rs.300,000/- for the expenditure presumed to have been incurred for the earning of tax free interest income on RBI bonds are va....

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....l before Ld CIT(A) and submitted as under:- i) That the action of Ld Assessing Officer is bad in law as no disallowance could have been made by him since there is no provision under the law for such disallowance on an estimate and arbitrary basis for the assessment year under reference i.e. 2007-08. Since Rule 8D was prescribed under sub section (2) & (3) to section 14A w.e.f. assessment year 2008-09. ii) That the investments are personal investments of the assessee and are not business investments and are appearing in personal balance sheet of the assessee and no expenditure was debited in the books of Intex Trades proprietorship concern of assessee or in the personal income tax. The assessee has not claimed any expenditure in the return....

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.... Cycle Ltd. (P&H). 7. CIT v. Winsome Textile Industries Ltd. (2009) 319 ITR 204 (P&H). 8. Wimco Seedling Ltd. v. DCIT (Spl. Range) (2007) ITAT Delhi Bench 'E' (Third Member) reported at 107 ITD 267 (Del.). 5. The Ld CIT(A) after hearing the submissions of the assessee did not agree with the contentions of assessee and upheld the decision made by the Ld Assessing Officer. The Ld CIT(A) held that though Rule 8D is not applicable to year prior to assessment year 2008-09 but the Assessing Officer has to enforce the provisions of section 14A(1) of the Act and for that purpose the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act....

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....utual funds. Rs.10,51,071/-   --------------------------- Rs.29,75,609/- ---------------------------- 10. Out of this income, a sum of Rs.21,66,023/- related to income from old investments and income from new investments is only to the tune of Rs.8,09,586/- and that too as dividend from mutual funds for which assessee need not to incur any expenses. Therefore, the disallowance @ 0.5% of total of average investment as per Rule 8D is not justified as a very small amount of new investment has been made during the year. Moreover, Rule 8D is not applicable for the year under consideration and assessee has not incurred any interest expenditure for earning of the exempt income. Moreover, the Assessing Officer has not specifically pointe....