TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 763
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....and in the circumstances of the case, ld. CIT(A)-XXV, New Delhi has erred in deleting the addition of Rs. 14,35,233/- out of total addition of Rs. 15,35,233/- made by AO u/s 14A read with Rule 8D of I.T. Rules." 3. Cross objections raised by the assessee in CO No. 354/Del/2012 read as under: 1. "That the CIT(Appeal) XXV New Delhi erred on facts and in law in confirming the disallowance of interest expenditure amounting to Rs. 1,00,000/- u/s 14A Income-tax Act, 1961 (the Act), alleged to have been incurred for earning tax free dividend income. 2. That the CIT(A) erred on facts and in law in not holding that disallowance u/s 14A of the Act, could not have been worked out as per the method provided in Rule 8D of the Income-tax Rules, 1962 ....
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....D of the I.T. Rules, 1962 (for short 'the Rules') is not applicable in the present case of the assessee as the cases related to A.Y. 2006-07 and the same is applicable from A.Y. 2008-09 onwards. The authorities below have not disputed that the assessee declared tax free dividend income of Rs. 20,83,618/- which was claimed as exempt u/s 10(34) of the Act in the return of income. From operative part of the impugned order we note that the CIT(A) granted relief for the assessee with following observations and conclusions: 3. "The assessee has taken as many as 2 grounds of appeal but the main grievance of the assessee is against the disallowance of interest of Rs. 15,35,233/- u/s 14A with respect to dividend income which is adjudicated accordin....
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....ch has been utilized for the purpose of business and as such the AO is not justified to make any disallowance of the interest payments which has been paid for the purpose of business. It is also submitted that the AO has not given any finding for invoking the provisions of Rule 8D which in any case is not applicable in the current year. It is also submitted that the assessee has not proved any nexus between the earning of tax free dividend and in investment of borrowed fund on which the interest payment is being disallowed by the AO by invoking the provisions of Rule 8D. The assessee also argued that since the provisions of Rule 8D is applicable with effect from AY 2008- 09 only and the same is not applicable in the case of the assessee as ....
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....mstances of the case, I find some merits in the submission of the assessee that the provisions of Rule 8D is not applicable in the case of the assessee but at the same time it cannot be denied that the assessee has earned tax free dividend income on which some part of the expenses would have been incurred and which is even otherwise disallowable u/s 14A and accordingly, it will be in the interest of justice to make a nominal estimated disallowance of Rs. 1,00,000/- and as such the disallowance of Rs. 1,00,000/- is confirmed and the balance amount of Rs. 14,35,233/- (Rs. 15,35,233/- (-) Rs. 1,00,000/-) is deleted." 7. In view of above, at the outset, we are in agreement with the conclusion of the CIT(A) that as per decision of Hon'ble Bomb....