TaxTMI 
TaxTMI 
2014 (12) TMI 1013
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....10. 2. The only issue in this appeal of Revenue is against the order of CIT(A) restricting the disallowance at Rs. 46,33,084/- as against the disallowance made by Assessing Officer at Rs,1,11,37,403/- by invoking the provision of Section 14A of the Act read with Rule 8D(2) (ii) of the IT Rules, 1962. For this, Revenue has raised following 4 grounds:- "1. That the Ld. CIT(Appeals)-VIII, Kolkata erred in law as well as in facts in restricting the disallowance of interest to Rs. 64,04,548/- and thus deleting the additions of Rs. 46,33,084/- made u/s 14A of the Income Tax Act, 1961 by the Assessing Officer. 2. That the Ld. CIT(Appeals) erred in negating Assessing Officer's reasons for dissatisfaction w.r.t. correctness of the claim of ....
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.... the extent of Rs. 50,71,126/-. The assessee made disallowance of proportionate expenses to the extent of Rs. 98,084/- as under:- "Calculation made by the assessee was as under: [4,92,253.28 * 5071126 / (2,03,79,379 + 50,71,126) = 98,083.65]" [whereas 4,92,253.28 = Total indirect expenses debited to P&L A/c, 50,71,126 = Total dividend earned and 2,03,79,379 = Gross receipts]" During the assessment proceedings, the assessee was asked to explain as to why expenses incurred in relation to income which does not form part of total income under the Act should not be disallowed. The assessee re-worked out the disallowance and submitted the calculation that the disallowance to the extent of Rs. 4,37,957/- can be made in respect of the inve....
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....ore CIT(A), who after taking the deployment of funds and details of interest payments restricted the disallowance at Rs. 64,04,548/- and Rs. 4,92,253/- under rule8D(2)(ii) and 8D(2)(iii) by observing as under:- "After considering the submission of the appellant of the appellant along with the detail furnished, perusing the entire facts of the case including the impugned assessment order and the other materials on record, the lone ground of the appeal regarding disallowance under section 14A of the Act, is partly allowed for the following reasons:- i) The AO has applied the provision of Rule 8D of Income Tax Rules, 1962 to the case of the appellant for the reasons that during the assessment proceeding appellant has offered different am....
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....lation to income which does not form part of the total income under this Act. ' v) That sub-Rule 1 of Rule 8D provides as under:- '(1) where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with:- a) The correctness of the claim of expenditure made by the assessee; or b) The claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2)' vi) Form the perusal of section 14(2) and Rule 8D(1) it is evident that for applying the Rule 8D the AO has t....
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..... 4,92,253/- for earning exempt as well as taxable income, hence the disallowance under Rule 8D(2)(iii) cannot exceed that amount. Accordingly the disallowance under Rule 8D(2)(iii) is restricted to Rs. 4,92,253/- thus the appellant gets relief of Rs. 6,07,518/- " Aggrieved, now Revenue is in appeal before us. 5. Before us Ld. SR-DR shown us ground No.1 as reproduced by CIT(A) and raised by assessee which reads as under:- "1) That the Ld. AO has disallowed the expenditure incurred in relation to income which does not form part of the total income u/s 2114A as per the method prescribed in Rule 8D. We have borrowed the fund both for acquiring the shares and also for granting the loan to different parties. Out of total expenditure of ....