2016 (9) TMI 1551

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....ome of Rs. 2.07 crores and claimed the same as exempt. The assessee disallowed a sum of Rs. 3,94,711/- u/s 14A of the Act towards administrative expenses by allocating part of salary and other expenses. The AO, however, was not satisfied with the workings of the assessee and accordingly computed the disallowance under Rule 8D(2)(iii) of the I T Rules at Rs. 19,82,296/-, being 0.5% of average value of investments. Accordingly he added the difference amount of Rs. 15,87,585/- to the total income of the assessee. The Ld CIT(A) also confirmed the same. 3. The Ld A.R submitted that the assessee has made investments in the group companies and mutual funds. She further submitted that the mutual funds investments were mostly made under "Reinvest....

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....above, the assessee is making short term investments in mutual funds, mostly in debt funds giving daily dividends. The details of such investments are given in page 53 of the paper book. A perusal of the same would show that the assessee has made investments in 12 types of schemes floated by various mutual funds. The assessee has invested in lump sums and withdrawn in lump sums. In fact, the assessee has invested Rs. 8275 crores in three schemes during the year under consideration and withdrawn the same during the current year itself. 6. With regard to the disallowance u/s 14A worked out by the assessee, we notice that the assessee has allocated a portion of salary expenses towards dividend income as detailed below:- Staff Salary &....

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....gorised as Short term investments. We have earlier noticed that the assessee has made investments to the tune of Rs. 8,275 crores and withdrawn equal amounts. Decision for making investment of such a high magnitude would definitely require involvement of high officials. The assessee has not furnished the basis for allocating 1% of Authorised Signatory's (CEO) salary expenses and 0.1% of his deputation expenses. It is also not known as to whether CEO alone took the decision for making investments in mutual funds. Normally such decisions are taken by consulting finance department and investment experts. However, such details are not available on record. 9. In view of the above reasons, it is difficult to accept the workings given by the as....