2014 (1) TMI 228

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....nfirmation of the disallowance of administrative and general expenses attributable towards earning of exempt dividend income u/s 14A by applying the formula as provided under the Rule 8D of the IT Rules. 3. The assessee received dividend income of Rs.22,39,65,640/- on its investments and claimed as exempt income. The Assessing Officer asked the assessee to furnish the details of its expense incurred for earning the dividend income. In response the assessee explained and submitted that the company had not incurred any interest cost on borrowings for investment purposes. It was further stated that the investment portfolio is handled by its MIS department, which primarily attends to the accounts and banking operations and out of staff cost,....

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....and therefore, the finding of the Commissioner of Income Tax (Appeals) is self contradictory; on one hand he held that Rule 8D is not applicable; whereas while adjudicating the issue, the formula as provided under Rule 8D is applied. He has further submitted that the assessee itself has disallowed a reasonable amount of expenses apportioned to the exempt income. The ld Sr counsel has pointed out that out of the total expenses Rs.49,85,000/- pertaining to MIS department, the assessee has allocated Rs. 7 lacs towards exempt income which is about 15% of the total expense, therefore, the disallowance made by the assessee itself is reasonable. He has submitted that since the authorities below have not found any fault in the apportionment made by....

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....of the assessee, if the Tribunal find that some reasonable disallowance is required to be made, then it has to be estimated without remitting the issue to the authorities below. 5. We have considered the rival submissions as well as the relevant material on record. The grievance of the assessee is that the Commissioner of Income Tax(Appeals) has applied formula as provided under Rule 8D for the disallowance of administrative expenses u/s 14A. There is no dispute that the provisions of Rule 8D are not applicable for the Assessment Year under consideration; therefore, in view of the decision of the Hon'ble jurisdictional High Court in the case of Godrej & Boyce Mfg Ltd (supra) the disallowance on account of administrative expense u/s 14A s....