2016 (11) TMI 1062

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....st identical and common grounds of appeal are raised, thus both the appeals were clubbed, heard together and are decided by common order. 2. Brief facts related to the disposal of the present appeals are that the assesseecompany is engaged in the business of investing in properties. For AY 2011-12, the assessee filed its return of income on 24th September 2011. In the return of income, assessee claimed exempt income of Rs. 3,40,617/-. The assessee has not apportioned any expenditure toward earning such exempt income. The return of income was selected for scrutiny and while framing assessment, the AO asked the assessee as to why appropriate disallowance should not be made u/s. 14A of the Income Tax Act as per Rule 8D. The assessee filed rev....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....folds, than the exempt income earned by the assessee. For AY 2011-12 Ld. AR of assessee argued that during the year under consideration, the assessee invested in mutual fund and earned exempt income of Rs. 3,40,617/-, the income was by way of dividend on the unit of mutual fund. The assessee borrowed funds from M/s Saraswat Bank for the purpose of investing in business, repayment of unsecured loan and for working capital. The assessee had invested the excess funds from time to time in mutual fund to save cost when the funds were temporarily not utilized. The assessee suo-moto disallowed interest expenditure of Rs. 7,03,118/- which was incurred to earn exempt income. The AR of the assessee further argued that details of computation of disall....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e voluntary disallowance of interest expenditure of Rs. 7,03,118/- was made. The AO while framing the assessment order simply observed that working of disallowance submitted by assessee is not as per Rule 8D not satisfied in respect of working is recorded. Ld. CIT(A) while considering the ground of disallowance concluded that assessee made the huge investment of Rs. 2,61,25,979/-. The assessee incurred finance cost of Rs. 2,49,37,929/- in the year. The AO finally concluded that the apportionment is required to be made in terms of section 14A r.w.r 8D which is mandatory from AY 2008-09. The Ld. CIT(A) has also not examined the pre-conditions for applicability of Rule 8D. The AO as well as the ld CIT(A) failed to record the correctness of the....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he disallowance is not as per Rule 8D, and the same was upheld by Ld. CIT(A). With the above observation, we hold that the disallowance u/s 14A should be restricted to Rs. Rs. 7,03,118/- plus Rs. 65000/- on account of administrative expenses as per Rule 8D2(iii). In the result the appeal of the assessee for AY 2011-12 is allowed. 4. For AY 2012-13, the Ld. AR of the assessee argued that assessee earned dividend income of Rs. 98,450/-. The assessee has not made any voluntary disallowance as they have not claimed deduction for the expenses incurred by assessee, thus, the disallowance u/s 14A were not possible. The AO disallowed a sum of Rs. 43,50,194/- u/s 14A of the Act, while framing assessment and the same was sustained in first appeal. ....