TaxTMI 
TaxTMI 
2022 (2) TMI 493
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.... that the assessing officer exceeded his jurisdiction in enhancing disallowance under section 14A while passing order under section 254/143(3) of the Act, in excess of the disallowance made in the first round. 1.3 That the CIT(A)/assessing officer failed to appreciate that no part of administrative expenditure was incurred in relation to exempt income so as to warrant any disallowance under section 14A of the Act. 1.4 Without prejudice, the CIT(A)/ assessing officer grossly erred in computing disallowance under section 14A of the Act by, inter alia, wrongly including investments not actually yielding exempt income during the relevant year. 2. Without prejudice, the CIT(A)/ AO erred on facts and circumstances of the case and in law in not appreciating that disallowance under section 14A resulted in double disallowance inasmuch as disallowance under that section had already been made in the original assessment order dated 12.4.2012 passed under section 143(3)1l44C of the Act. 3. That the CIT(A) erred on facts and in law not deleting interest charged under section 234C of the Act. The appellant craves leave to add, amend, alter or vary the ....
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....e the issue afresh following the ratios laid down by the Hon'ble jurisdictional High Court in the case of Maxopp Investment Ltd. (supra) after affording opportunity of being heard to the assessee. The ground is accordingly allowed for statistical purposes." 4. In pursuance to the direction of the Tribunal, the AO passed the impugned assessment order dated 12.05.2017 u/s 254 r.w.s. 143(3)/144C of the Act. Thereby, the AO yet again made disallowance u/s 14A of the Act of Rs. 5,66,45,019/-. 5. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who sustained the disallowance to the extent of Rs. 4,84,62,000/-. The Ld.CIT(A) deleted the disallowances related to interest expenditure however, sustained the disallowance of administrative expenses. 6. Now, the assessee is in appeal before this Tribunal. 7. Ld. Counsel for the assessee vehemently argued that the authorities below were not justified in making the disallowance. He submitted that the law is clear and there is no ambiguity under the law. The AO has to record his satisfaction, having regard to the accounts of the assessee qua the correctness of the claim of the assessee in respect of such expen....
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....he manner prescribed under rule 8D since the said rule had no applicability for the year under consideration which is A.Y. 2007-08. Hence, the amount to be disallowed has to be computed in a reasonable manner. The Hon'ble Bombay High Court in the case of CIT vs. Godrej Agrovet Ltd. [ITA 934 of 2011 dated 08/01/2013] have held that disallowance based on the basis of percentage of exempt income can constitute a reasonable basis for disallowance to be made under section 14A prior to A.Y. 2008-09. 4.2.5 Having established that disallowance is to be made under section 14A, looking at the quantum of disallowance computed, it is noted that the AO has also proportionately disallowed interest expenditure incurred. It has been submitted that the appellant has substantial free reserves and surplus which far exceeds the amount of entire investment made. It has also been submitted that the borrowings of the appellant are granted for specified business purpose only, i.e, for capital expenditure or for meeting the working capital requirement as per the terms and conditions of the borrowings and are not granted and are not used for investments which yield exempt income. From the detai....
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....he percentage of 5.50 adopted by the appellant is reasonable/has a scientific basis, the disallowance worked out by the AO considering 0.6% of the average of the value of the investment cannot be faulted. 4.2.8 In view of the discussion above, it is held that in view of the fact that the appellant has claimed exempt income of Rs. 1,52,74,13,328/-, disallowance is required to be made under section 14A in light of the decision of the Hon'ble Supreme court in the case of Maxopp investment Ltd. (supra). Further, since it has been held that no disallowance can be made on account of interest expenditure, the disallowance is restricted to 0.6% of the average of the value of investment computed at Rs. 807.7 crores which comes to Rs. 4,84,62,000/-. Grounds of appeal Nos. 2 to 2.7 are partly allowed." 10. There is no dispute with regard to the fact that Rule 8D of Income Tax Rules, 1962 ("the Rules") is not applicable for the Assessment Year under appeal. We find that Ld.CIT(A) erroneously affirmed the action of the Assessing Officer regarding disallowance of administrative expenses applying the Rule 8D of the Rules. This approach of authority below is not justified. The law ....