2022 (4) TMI 38

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....ee has assailed the impugned order on the following grounds of appeal before us : "On the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) was erred and not justified in : 1. Upholding the Disallowance of Rs. 4,70,298/- made by the Assessing Officer out of interest A/c. 2. Upholding the Disallowance of Rs. 1,73,774/- made by the Assessing Officer out of Management & Development Expenses for Investment. 3. Upholding Lump sum Disallowing of Rs. 1,00,000/- made by the Assessing Officer of Telephone & Travelling Expenses. 4. The order of the Learned CIT (A) is erroneous in law as well as in facts." 2. Briefly stated, the assessee-firm which is engaged in the bus....

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....re was relatable to earning of the exempt income could be accepted i.e, after referring to its accounts, had invalidly assumed jurisdiction and mechanically worked out the disallowance u/s 14A of the Act; and (ii) that as the assessee had sufficient interest free funds available with it, therefore, no part of the interest expenditure was liable to be disallowed under section 14A r.w Rule 8D(2)(ii). 5. Per contra, the Learned D.R. relied on the orders of the lower authorities. It was submitted by the Learned D.R. that as the assessee had failed to attribute any part of the expenditure towards earning of the exempt dividend income, therefore, the A.O. had rightly worked out the disallowance under section 14A by triggering the mechanism con....

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.... the assessee's "balance sheet" for the year under consideration. On perusal of the financial statement of the assessee firm, we find that it had admittedly an amount of Rs. 27,11,19,684.41 available with it on 31.03.2013, while for the investments in the exempt income yielding shares aggregated to an amount of Rs. 1,93,77,172/-. Backed by the aforesaid facts, we are of the considered view, that as the assessee firm had sufficient interest-free funds available with it to source the investments made in the exempt income yielding shares, therefore, no part of the interest expenditure was liable to be disallowed under section 14A of the Act. Our aforesaid view is fortified by the Judgment of the Hon'ble High Court of Gujarat in the case of Pr.....

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....ing assets. 7.1. As is discernible from the assessment order, the A.O. being of the view that part of the management and development expenses incurred by the assessee could safely be attributed to the exempt income yielding investments made by the assessee, therefore, he had on a pro-rata basis worked out a disallowance of Rs. 1,73,774/-. 7.2. Having given a thoughtful consideration to the aforesaid issue, we are unable to persuade ourselves to subscribe to the view taken by the lower authorities. On the one hand the A.O. had worked out the disallowance of the "administrative expenses" to the extent the same were relatable to earning of the exempt income i.e, by triggering the provisions of Section 14A r.w Rule 8D, while for on the ot....