M/S. GEETGANGA INVESTMENT PVT. LTD.,,BARODA vs. THE DY.CIT, CIRCLE-1(1),, BARODA

The solitary grievance of the assessee in the instant appeal is towards disallowance of general and administrative expenses of Rs.4,84,060/- in terms of Rule 8D(2)(iii) of the Income Tax Rules (‘the Rules’) under the umbrella of Section 14A of the Act.

When the matter was called for hearing, the learned AR for the assessee at the outset referred to the audited financial statements and submitted with reference to the various types of expenditure incurred under the head ‘administrative expenses’ that assessee has not manifestly incurred any expenditure which is relatable to investments yielding tax free income. The learned AR thus submitted that in the absence of expenditure claimed of general nature, there is no scope for applicability of Rule 8D(2)(iii) of the Rules. The learned AR thus submitted that in the given facts there could be no satisfaction on the part of the AO to invoke Section 14A of the Act.

The learned DR, on the other hand, relied upon the orders of the lower authorities.

We have carefully considered the rival submissions. The statutory disallowance of general/administrative expenses having regard to Rule 8D(2)(iii) of the Rules r.w.s. 14A of the Act is in question. The AO has noticed certain tax free income in the form of dividend and has accordingly invoked Section 14A of the Act to disallow the expenditure relatable to earning of such tax free income in terms of formula laid down under Rule 8D of the Rules. However, as pointed out on behalf of the assessee, it is ostensibly clear that assessee has not claimed any expenditure which could be said to be attributable to investments giving rise to tax free income. Therefore, in the absence of any expenditure claimed, no disallowance thereof is possible. Hence, in the facts of the case the Revenue authorities have

In the result, appeal of the Assessee is allowed.