2014 (9) TMI 1110

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....nt proceedings noticed that the assessee had received dividend income of Rs. 4677942/- which was claimed as exempt under section 10(34) of the Income Tax Act (hereinafter referred to as the Act). He further noted that the assessee had not attributed any expenses incurred to earn the above exempt income. He therefore computed the disallowance under section 14A in accordance with the provisions of rule 8D at Rs. 8,61,509/-.  3. In appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)], it was submitted that the assessee had earned major part of income from professional fees and incurred expenses for the same. Out of the total administrative expenses of Rs. 5,99,14,291/-, a sum of Rs. 5,82,53,311....

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....d rather the same should be apportioned in ratio of taxable income to exempt income. On the other hand, the ld. D.R. has relied upon the findings of the lower authorities. 5. We have considered the rival submissions of the ld. representatives of the parties. It may be observed that in the case of 'Godrej & Boyce Manufacturing Co. Ltd.' 328 ITR 81, the Hon'ble Bombay High Court has held that under section 14A of the Income Tax Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of the AO has to be arrived at, having regard t....

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.... of the assessee reveals that the assessee had a net positive interest income, under such circumstances, it cannot be said that the assessee had incurred interest expenditure for earning of exempt income. So far the remaining amount of expenditure of Rs. Rs. 16,60,983/- on account of common administrative expenses is concerned, the disallowance of Rs. 8,61,509/- u/s 14A seems to be excessive, considering the taxable income of the assessee of Rs. 3,20,54,051/-. Moreover, the mechanical application of rule 8D in this case is not warranted, considering the submissions of the assessee that major part of the investment was in unquoted shares of the group companies, the capital gains income from which was not exempt and even no dividend income wa....