TaxTMI 
TaxTMI 
2015 (8) TMI 41
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....determined the total income at Rs. 11,08,81,44,314/- as against the returned income of Rs. 654,70,28,828/- which was revised to Rs. 558,93,59,842/-. In the additions made in the said order, one addition which is under dispute is with reference to the disallowance u/s. 14A. AO noticed that assessee has earned an amount of Rs. 5,11,26,104/- which was claimed as exempt during the year under consideration. Assessee has quantified the expenditure of the treasury department at Rs. 65,50,068/- and as per the orders of CIT(A) / ITAT in earlier years, considered two months of the expenditure of the treasury as expenditure attributable to earning the exempt income. Accordingly, an amount of Rs. 10,91,681/- was disallowed by assessee against the claim....
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....al to the order of the CIT(A). The CIT(A) also further noted that applicability of Section 14A r.w.r. 8D had been categorically upheld by the CIT(A) and therefore, it was felt that the disallowance was in conformity with the directions of the Ld.CIT(A). Assessee is aggrieved, hence, present appeal. 5. Drawing our attention to the assessment order, appellate orders of the CIT(A) and consequential order passed, it was submitted that originally AO determined the disallowance at 80.48% of exempt income of Rs. 5.11 Crores, whereas the present AO went beyond the issue and disallowed an amount of Rs. 10.98 Crores. It was further submitted that assessee has no borrowed funds which are invested in exempt investments. It was submitted that value of ....
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.... and accordingly disallowed an amount of Rs. 10,91,681/-. AO while recording a finding that assessee has two business streams i.e., treasury operations and other banking operations, however, determined the percentage of expenditure to the earning of income based on banking operations. Thus, ratio of 80.48% of expenditure to revenue was arrived at on the banking operations and not on treasury operations. Be that as it may, the original disallowance which was subject matter of appeal was only to the extent of Rs. 4,11,46,288/-. The Ld.CIT(A) while upholding the disallowance, directed the AO to examine under Rule 8D and the working given by assessee to arrive at the disallowance of Rs. 92,43,413/- which is as under: Calculation of Rule 8D for....
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....th the working, he can at best disallow the amount originally disallowed by the AO. However, AO reworked out the entire amount, considered expenditure by way of interest of the banking operations into the treasury operations and disallowed interest attributable to banking operations to an extent of Rs. 10,13,20,739/- as attributable to exempt incomes. Therefore, AO in our view has committed a mistake in considering the extraneous factors in disallowing the amount. Moreover, there is no explanation also with reference to the average value of investments. Assessee itself admits that the average value of investment was at Rs. 206.70 Crores. Without any explanation or working, AO considered the average value of investment at Rs. 170.40 Crores. ....