TaxTMI 
TaxTMI 
2018 (7) TMI 751
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....e disallowance u/s. 14A read with rule 8D to Rs. 39,57,250/-. 3. Briefly stated facts are that during the year the assessee had earned exempt dividend income of Rs. 92,73,195/-. Against the said income the assessee had offered Rs. 2,25,735/- as expenses attributable in order to earn such exempt income u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). According to Ld. AR the basis of quantifying such expenses was based on the fact that about 20% of the time cost of the Treasury Department of the assessee was involved in the investment in mutual funds and some other investments dividend from which are exempted and, therefore, 20% of the salary cost of the Treasury Department was offered for taxation u/s. 14A of the....
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....total investments lying in the balance sheet as on 31.03.2008 and 31.03.2009 (excluding foreign investments) instead of those investments which have yielded exempted income during the relevant year. After considering the detailed submission of the Ld. AR, the Ld. CIT(A) directed to compute the disallowance under rule 8D(ii) and 8D(2)(iii) by adopting those investments which have yielded exempted dividend during the relevant year and not all the investments by relying on the decision of Hon'ble Calcutta High Court in the case of CIT Vs. REI Agro Ltd., ITAT 161 of 2013 dated 23.12.2013 and the decision of ITAT, Kolkata in the case of GVN Fuels Ltd. Vs. DCIT in ITA No. 2278/Kol/2013 dated 25.05.2016 and made the total disallowance u/s. 14A rea....
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....ce suo-motto made by the assessee, so it is dismissed 5. Coming next to the issue in question is as to whether the Ld. CIT(A) is justified in directing the AO compute the disallowance under rule 8D(ii) and 8D(2)(iii) by adopting those investments which have yielded exempted dividend during the relevant year. The direction to the AO to compute the disallowance under rule 8D(ii) have been already disposed of by us, so what is left is his direction in respect of Rule 8D (iii) and for that we note that this Tribunal has consistently followed the dictum of law laid down in REI Agro Ltd. Vs. DCIT 144 ITD 141 in which the Tribunal held that only investment which has given rise to the exempted income should be taken into consideration while comput....
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.... I find that the above expenses were routine maintenance/support services/consultancy services etc. In my view the said expenses should be allowed as revenue expenses. 2. Further, similar disallowance was deleted by the Hon'ble ITAT with a detailed observation in the order for AY 2003-04. The said decision has been followed by the Hon'ble ITAT in its subsequent orders. In view of the above, I direct the AO to consider the software expenses as allowable revenue expenses." Aggrieved, revenue is in appeal before us. 7. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the according to AO, the expenses of Rs. 2,03,13,632/- on account of ERP up-gradation were in the nature of capital exp....