TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1725
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.... the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 76/Mum/2016 for AY 2011-12, read as under:- " 1. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the assessment order dated February 28, 2014,, passed by the Assessing Officer ("AO"), concluding the assessment for assessment year 2011-12 at Rs. 2,20,22,073 , as against returned income of Rs. 2,15,32,490. 2. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the AO under section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 ("the Rules") amounting to Rs. 4,89,583, without appreciating that the Appellant has not incurred any expenditure, directly or indirectly, for earning the exempt income. 3. Without prejudice to the above, that on the facts and circumstances of the case and in law, the CIT(A) ought to have allowed the claim of the Appellant that the disallowance under section 14A of the Act should be such amount out of the total administrative expenditure of Rs. 4,51,548 which is in the same proportion which dividend income of Rs. 45,08,883 bears to the total receipt....
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.... omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal. " 4. The brief facts of the case are that the assessee is a firm of advocates. First we will take up appeal of the assessee for AY 2011-12 in ITA no. 76/Mum/2016 . The assessee earned dividend income which was claimed as an exempt income to the tune of Rs. 45,08,883/- which was earned from various investments held by the assessee firm. The AO asked assessee during the course of assessment proceedings conducted u/s 143(3) r. w. s. 143(2) of the 1961 Act to explain as to why disallowance should not be made u/s. 14A of the Act, r. w. r. 8D of Income-tax Rules, 1962. The assessee submitted that no expenditure was incurred to earn an exempt income . The aforesaid contention of the assessee was rejected by the AO who held that for earning an exempt income and for management of investments requires expenses to be incurred while the assessee has claimed entire expenses against non-exempt income while no expenses were claimed/allocated to have been incurred for earning an exempt income. The AO after relying on decision of Hon‟ble Bombay High Court in the case of Godr....
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....management of investments requires monitoring which necessitates expenditure in terms of man-hours and administrative expenditures such as telephone, postage, office expenses etc. The upkeep and maintenance of any investment portfolio for earning of income necessitates expenditure on supportive office and other infrastructure facilities apart from financial cost on the funds deployed. This, in my opinion, is a proper reason given by the AO for his not being satisfied with correctness of claim of the appellant before applying Rule 8D. I also find that the investments of the appellant giving rise to tax free income has gone up from Rs. 6,80,72,553/- to Rs. 12,77,60,729/-. It is also seen from the details of investment as on 31,03. 2010 and 31. 03. 2011 that many of the old investment has been liquidated partly and new investments have been made. The investment in HDFC Mutual Fund was Rs. 1,25,84,059/- on 31. 03. 2010. The same was Rs. 2,98,07,682/- on 31. 03. 2011. Similarly, the investment in DWS Mutual Fund has gone up from Rs. 3,01,26,005/- to Rs. 4,10,19,813/-. In addition to the increase in these investments, the appellant has made fresh investments in HDFC EMP 370D of Rs. 1,00,....
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....several old investments. Therefore, I am of the considered opinion that the AO has rightly applied Rule 8D and made the disallowances. It may be stated that the AO himself has not made any addition under Rule 8D(2)(i) or 8D(2)(ii) and only ½ per cent of the average value of the investment the income from which does not or shall not form part of the total income was considered to make the disallowance of Rs. 4,89,583/- under rule 8D(2)(iii). It may be stated that the exempt income shown by the assesse is quite very high at Rs. 45,08,883/-and the average value of investment was also very high at Rs. 9,79,16,641/-, The AO has properly recorded satisfaction for applying Rule 8D which, as held by the Hon'ble jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. (supra), is applicable from A. Y. 2008-09 onwards. If any hardship is caused due to operation law, the remedy does not lie with any appellate authority. Equity and hardship cannot be the ground for interpretation of law. Useful reference may be made to decisions of Hon'ble Supreme Court in Karmachari Union v. UOI (243 ITR 143) and Tarulata Syarn v. CIT (108 ITR 345). In view of the above factual and legal posit....
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....nfirmed by learned CIT(A). On the other hand, the learned DR would rely on orders of authorities below and contention is made that disallowance of indirect expenses were made under Rule 8D(2)(iii) of the 1962 Rules r. w. s. 14A of the 1961 Act and hence decision relied upon by the assessee in the case of Abhishek Industries Ltd. (supra) has no applicability to the facts of this appeal as the case law relied upon by the assessee deals with disallowance of interest expenses . 7. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is a firm of advocates and are Advocate on Record with Hon‟ble Supreme Court. The assessee has made investments in mutual funds and other securities. The assessee firm received exempt dividend income of Rs. 45,08,883/- during the previous year relevant to impugned assessment year 2011-12 under consideration. The assessee has invested large sum of money in mutual funds and other securities and average value of investment was to the tune of Rs. 9,79,16,641/- . The investments have been switched from one securities to another during the year under consideration as also fres....