TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1601
X X X X Extracts X X X X
X X X X Extracts X X X X
....order was recalled vide order dated 9.4.2018 passed in M.A.No. 26/Chd/2018. 2. The sole issue raised in this appeal is relating to disallowance u/s 14A read with Rule 8D of the Income Tax Rules in respect of the expenditure incurred by the assessee for earning of tax exempt dividend income. During the course of assessment proceedings, the Assessing Officer noted that the assessee had shown total investment of Rs. 58.09 cores as on 31.3.2010. The Assessing Officer further noted that the assessee earned tax exempt dividend income of Rs. 1.06 crores. However, the assessee had suo motu disallowed an expenditure of Rs. 1,33,928/- only u/s 14A of the Income Tax Act, 1961 (in short 'the Act'). Act. On being asked to explain as to why dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 1,33,928/- u/s 14A in its return due to fear of penal consequences." 3. The Assessing Officer, however, did not agree with the above computation made by the assessee. He mainly rested his findings on the ground that the rule 8D of the Income Tax Rules has been found valid by various Courts. Further, he observed that the assessee while computing the aforesaid disallowance on proportionate has only taken into consideration the administrative expenses and has not considered the other expenses like rent, salary paid extra. He, therefore, invoked the provisions of Rule 8D of the Income Tax Rules and computed the interest disallowance under Rule 8D(2) (ii) at Rs. 1,01,48,231/- and administrative expenses under Rule 8D(2)(iii) at Rs. 18,50,04....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent interest free own funds in the shape of capital, reserves & surplus and cash accrual to meet the investments in question. A perusal of the said chart revels that the total capital reserves and surplus of the assessee during the financial year under consideration 2009-10 were at Rs. 19405.71 lacs and the total cash accruals of the assessee during the year were at Rs. 11071.90 lacs. The total investment during the year including the own old investments were only at Rs. 5809.29 lacs, which shows that the own / interest free funds of the assessee were sufficient to meet the investments. The issue is, thus, covered by the various decisions of the Hon'ble High Courts including that of the Hon'ble Jurisdictional High Court in 'Bright ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to others 21202161 b. Administrative expenses 130240267 c. Personal expenses and other allowances 405282110 556724538" 7. None of the lower authorities have pointed out any defect in the computation of proportionate disallowance computed by the assessee except that certain part of the administrative expenses were not taken into consideration which has been taken into consideration in the computation made above. Even the assessee has claimed that it has not incurred any administrative expenses for earning of tax exempt income. The Assessing Officer in this respect has not recorded any dissatisfaction taking into consideration the accounts of the assessee. The Hon'ble Bombay High Court in the case of 'Godrej & Boyce Manu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccounts of the assessee is required to record his satisfaction that the self or voluntarily expenditure offered by the assessee or claim that no expenditure has been incurred by the assessee in relation to earning of exempt income was not correct or the same was unsatisfactory on examination of the accounts of the assessee. Without recording such a satisfaction, he cannot proceed to apply Rule 8D for the computation of disallowance under section 14A. However, as observed above, in the case in hand, the Assessing officer has not followed the guidelines of objective satisfaction as laid down by the Hon'ble Bombay High Court in the case of 'Godrej & Boyce' (supra) while making the disallowance. Neither the Assessing Officer nor the Ld. CI....