TaxTMI 
TaxTMI 
2020 (2) TMI 1269
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.... 1. "The Ld. CIT(A) erred in confirming the action of the Ld. AO in invoking Rule 8D of the Rules for computing disallowance u/s 14A of the Act without recording satisfaction with respect to the suo moto disallowance made by the Appellant as mandated in Section 14A of the Act. 2. The Ld.CIT(A)/AO failed to appreciate that the Appellant has been consistently making the suo moto disallowance u/s 14A of the Act by following the same computational methodology since AY 2008-09 to 2011-12. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO/Ld. CIT(A) erred in making/upholding an addition of Rs. 2,26,13,434/- u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules in the impugned assessmen....
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.... submitted that it has made suo moto disallowance of Rs. 16,95,69,008/-,the working of which has been incorporated at pages 2 & 3 of the impugned assessment order. The Ld. AO after detailed discussion, held that the working of the disallowance made by the assessee as per Rule 8D(iii) at Rs. 3,53,49,023/- is less than 0.5% of the average value of the investment and the correct figure should be Rs. 5,79,62,456/-. He, thus, calculated the disallowance as per Rule 8D(2) at Rs. 19,21,82,442/- in the following manner: Clause Particular Calculation Amount i. Expenditure directly related to exempt income Rs. 1,45,69,045/- Rs. 1,45,69,045/- ii. Disallowance of interest expenditure: Rs. 12,92,60,080/- ....
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....IT (A) has confirmed the computation made by the AO. 5. Before us, Ld. Counsel submitted that majority of the shares has been held in the holding company and out of 42 crores of dividend income; Rs. 38 crores has come from the holding company. The assessee itself has given a very detail working for the suo moto disallowance of Rs. 16,95,69,008/- and the only dispute is with regard to disallowance under Rule 8D(2)(iii). The assessee has excluded the expenditure relating to interest income, consultancy income and dividend. Our attention was drawn to page 39 of the PB to point out the Revenue from operations and other income and also the financial cost and other expenses debited to the profit and loss account. He also pointed out the expend....
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....ed in this process. There is direct and proximate nexus between the exempted income, which the investments shall generate and the expenditures directly or indirectly involved in earning the said income. Hence, I am fully satisfied to invoke the provisions of section 14A read with Rule 8D to work out disallowance of expenditures." Thus, the disallowance made by the AO should be upheld. 7. After considering the rival submissions and on perusal of the relevant finding given in the impugned order as well as the material referred before us, we find that assessee has made disallowance of expenditure in relation to the dividend income in the following manner: - Expenditure in relation to Dividend Income S.No. Particulars Detail ....
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....bifurcating the operating and non-operating revenue, expenses which are not connected with earning of the exempt income has been removed. Such methodology has been accepted by the AO in the earlier years. From the bare perusal of the nature of expenses, it can be seen that, none of these expenses are directly or indirectly attributable for earning of exempt income. 8. Section 14A (2) provides that the AO while determining the amount of expenditure incurred in relation to the exempt income, first of all, should examine the claim of the assessee having regard to the accounts maintained by the assessee and then he has to satisfy himself with the correctness of the claim of the assessee in respect of expenditure incurred in relation to th....