TaxTMI 
TaxTMI 
2015 (12) TMI 501
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....ng the disallowance of expenses u/s 14A of the ITA, 1961 made by the learned ACIT, Range-9, Pune. The learned CIT(A)-V, Pune ought not to have sustained disallowance of Rs. 6,35,558/- u/s 14A of the ITA, 1961, considering the facts of the case and various legal propositions. 2. The learned CIT(A)-V, Pune erred in law and on facts in sustaining disallowance u/s 14A of the ITA, 1961 without appreciating that, no satisfaction as to incorrectness of expenses worked out by the appellant's is reached by the learned AO prior to making the said disallowance. 3. The learned CIT(A)-V, Pune and the learned AO erred in law and on facts in making disallowance of interest u/s 14A of the ITA, 1961 disregarding the fact that, investments in various....
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....page 7 of the Paper Book being Schedules forming part of the Balance Sheet as on 31st March, 2009. These investments in shares and securities, etc. have yielded tax-free dividend income noted above. Therefore, the AO invoked the provisions of section 14A of the Act to disallow expenditure relatable to the income which is exempt from tax and as a sequel thereto, computed the disallowance of Rs. 10,84,990/- in terms of Rule 8D of the Rules. 5. The breakup of disallowance made by the AO is as under :- (a) in terms of Rule 8D(2)(ii) of the Rules - Rs. 5,82,322/- (b) in terms of Rule 8D(2)(iii) of the Rules - Rs. 5,02,668/- Thus, estimated suo-motu disallowance of Rs. 35,007/- by the assessee was not agreed upon by the Assessing Officer. 6.....
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....in para 10 of his order were accepted. As per revised working, the disallowance of proportionate interest under Rule 8D(2)(ii) of the Rules worked out to Rs. 3,59,897/- and disallowance of administrative expenses, etc. being 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules worked out to Rs. 3,10,668/-. Accordingly, the disallowance under section 14A of the Act r.w. Rule 8D of the Rules was reduced and revised to Rs. 6,70,565/- as against the aggregate disallowance of Rs. 10,84,990/- computed by the Assessing Officer. 7. Aggrieved by the impugned order of the CIT(A), assessee is in appeal before us. 8. The Ld. Authorized Representative for the assessee, at the outset, drew our attention to the fact that the assessee i....
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....exempt income, the disallowance of interest component under Rule 8D(2)(ii) of the Rules is not justified. 9. He further emphasized that disallowance under Rule 8D(2)(iii) of the Rules is also improper. It is so because the dividend is self-generated income for which no administrative costs etc. per se are required to be incurred. However, the assessee itself has offered a reasonable disallowance of Rs. 35,007/-, which is appropriate in the circumstances. He further added that the CIT(A) had made a adhoc disallowance of Rs. 50,000/- relevant to assessment year 2007-08 on estimated basis and therefore, there is no justification to make substantially higher disallowance in this year. He next contended that the Assessing Officer was not justif....
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.... accepted. Mere utilization of OD / CC accounts for routing payment towards investment shares by itself has no consequence as such. The payment out of these overdrafts account is only a way of making payment. The overall position of interest-free funds, borrowed funds, etc. qua the corresponding investments yielding tax-free income is a relevant factor need to be borne in mind. It is not the case of the Revenue that any direct expenses including interest expenses have been incurred. The principle governing the case has already been laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra). We are also squarely governed by the direct decision of the Hon'ble Bombay High Court in the case of CIT ....
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.... not given any scientific basis for arriving at its own estimation. Ostensibly therefore, preference need to be given to statutory formula over the ad-hoc estimation made by the assessee. The onus lay upon the assessee to prove the quantum of expenditure incurred in earning the taxfree income which remains un-discharged. 13. Accordingly, we decline to interfere with the disallowance sustained by the CIT(A) under Rule 8D(2)(iii) of the Rules which is quantified at Rs. Rs. 3,10,668/-. Thus, on this count, the plea of the assessee fails. 14. The Assessee has inter alia also taken a legal plea and has objected to authority of Assessing Officer in invoking section 14A of the Act in the absence of requisite 'satisfaction' in this regard....