SNK INVESTMENT P.LTD, MUMBAI V. ITO 3(3)(3), MUMBAI

ITA 7437/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3479 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7437/MUM/2013 FOR ASSESSM ENT YEAR: 2010-11 M/S SNK INVESTMENT PVT. LTD. 157, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI-400021. PAN: AAECS8123R VS. ITO 3(3)(3), ROOM NO. 672, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY R. PA RIKH (AR) REVENUE BY : SHRI VACHASPATI TR IPATHI (DR) DATE OF HEARING : 02.06.2016 DATE OF ORDER : 26.08.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A)-7, MUMBAI, DATED 11.09.2013 FOR ASSESSMENT YEAR (AY) 2 010-11. THE ASSESSEE HAS RAISED ONLY ONE GROUND OF APPEAL ABOUT THE ADDI TIONAL DISALLOWANCE OF RS. 10,98,239/- U/S 14A OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, WHO IS NON-BANKING FINANCIAL COMPANY, FILED ITS RETURN OF INCOME FOR AY 2010-11. WHILE FRAMING ASSESSMENT, THE AO OBSERVED THAT ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS. 94,71,209/- WHICH IS CLAIMED AS EXEMPT INCOME. THE ASSESSEE VOLUNTARILY DISALLOWED RS. 7,87,821/- U/S 14A. DURING THE ASSES SMENT, THE AO ASKED THE 2 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. ASSESSEE TO FURNISH THE DETAILS OF THE DISALLOWAN CE AMOUNTING TO RS. 7,87,821/-. THE ASSESSEE SUBMITTED ITS REPLY DATED 29.10.2012. THE REPLY OF ASSESSEE EXTRACTED BY AO IN ITS ORDER WHICH IS AS U NDER: 1. ASSESSEE HAS DISALLOWED AND AMOUNT OF RS. 7,87, 821/- U/S 14A IN THE RETURN OF INCOME WORKING OF THE SAME WAS ALREADY SUBMITTED TO YOU. 2. DISALLOWANCE U/S 14A OFFERED BY ASSESSEE IS REAS ONABLE AND BASED ON SOUND ACCOUNTING, COSTING AND TAXATION PRINCIPLE. THE SAM E CAN BE SEEN FROM THE FOLLOWING CALCULATION:- (I) DURING THE YEAR ASSESSEE HAS EARNED DIVIDEND IN COME OF RS. 94,71,209/-. THE TOTAL OF THE ASSESSEE AS PER PROFIT & LOSS ACCOUNT IS RS. 1,02,64,225/-. ACCORDINGLY RATIO OF DIVIDEND INCOME TO TOTAL INCOME IS 92.27%. HENCE, ASSESSEE HAS DISALLOWED 92.27% OUT OF THE OTHER EXPENSES OF RS. 52,108/- WO RKING AS UNDER: DISALLOWANCE U/S 14A TOTAL EXPENSES 14,21,018/- LESS: DEPRECIATION 12,746/- INTEREST 13,56,164/- 52,108/- DISALLOWANCE @ 92.30% ON 52,108/- 48,096/ - INTEREST 7,39,725/- 7,87,821/- (III) BALANCE INTEREST EXPENSES OF RS. 6,16,439/- I NCURRED IN RESPECT OF INTEREST INCOME OF RS. 7,92,416/- AND HENCE CANNOT BE CONSID ERED FOR DISALLOWANCE U/S 14A. (II) ASSESSEE HAS DISALLOWED RS. 7,39,725/- OUT OF TOTAL INTEREST EXPENSES OF RS. 13,56,164/- BEING INTEREST PAID ON BORROWED FUNDS U SED FOR THE PURPOSE OF INVESTMENT WORKING AS UNDER: INTEREST PAID ON LOAN UTILIZED FOR INVESTMENTS LOAN FROM MRS. ARUN N. KAMPANI & 10% PERIOD FOR WHICH LOAN AMOUNT AMOUNT AMOUNT UTILIZED FOR INVESTMENTS-INCOME OF WHICH IS EXEMPT FROM 29-05-2009 TO 02-06-2009 15,00,00,000 2,05,4 79 FROM 19-06-2009 TO 01-07-2009 15,00,00,000 5,34,2 47 7,39,726 INTEREST PAID ON LOAN UTILIZED FOR GIVING LOANS TO JM FINANCIAL SERVICES FROM 03-06-2009 TO 18-06-2009 15,00,00,000 6,16,438 6,16,438 3 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. INTEREST EARNED ON LOAN TAKEN UTILIZED FOR GIVING L OAN TO JM FINANCIAL SERVICES @ 12%. FROM 03-06-2009 TO 18-06-2009 15,00,00,000 7,89,041 7,89,041 THE WORKING GIVEN BY ASSESSEE WAS NOT ACCEPTED BY T HE AO, AND AO WORKED OUT THE DISALLOWANCE U/S. 14A R.W. RULE 8D OF RS. 1 7,21,233/- ON THE BASIS OF .5% OF AVERAGE VALUE OF INVESTMENTS. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) BUT WITH OUT ANY SUCCESS. THUS, THE PRESENT APPEAL IS FILED BEFORE US. 3. WE HAVE HEARD THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. AR OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 94,71,209/-. THE ASSESS EE VOLUNTARILY DISALLOWED A SUM OF RS. 7,87,821/- U/S. 14A OF THE ACT WHICH CONSIST OF DIRECT INTEREST EXPENDITURE AND THE OTHER EXPENSES ON PRO-RATA BASIS AS PER THE DETAILS MADE AVAILABLE TO THE AO DURING THE ASS ESSMENT PROCEEDING. AR FURTHER ARGUED THAT AO HAS NOT REJECTED THE BOOKS O F ACCOUNT NOR RECORDED ITS DISSATISFACTION. LD. AR FURTHER SUBMITTED THAT THE CALCULATION OF VOLUNTARY DISALLOWANCE MADE BY ASSESSEE WAS ANNEXED WITH THE WRITTEN REPLY SUBMITTED TO THE AO. LD. AR OF THE ASSESSEE ARGUED THAT THE A DDITIONAL DISALLOWANCE MADE BY AO AND CONFIRMED BY CIT(A) BE DELETED. LD. LD. AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF ITAT, DELHI IN THE CASE OF M/S GILLETTE GROUP INDIA PVT. LTD. VS. DCIT (ITA NO.267 /DEL/2012), DECISION OF MUMBAI TRIBUNAL IN AFL P. LTD. VS. ACIT (ITA NO. 31 23/MUM/2011) AND DECISION OF PUNE TRIBUNAL IN ACIT VS. MAGARPATTA TO WNSHIP DEVELOPMENT AND CONSTRUCTION CO. LTD. (2014) TAXMAN.COM 284 (PU NE-TRIB). LD. DR STRONGLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 4 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN GILLETTE GROUP IND IA PVT. LTD.(SUPRA) THE ITAT, DELHI WHILE CONSIDERING THE IDENTICAL GROUNDS HELD AS UNDER: 6. FROM THE ABOVE, IT IS EVIDENT THAT AS PER SUB-S ECTION (1) OF SECTION 14A, NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF EX PENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NO T FORM PART OF TOTAL INCOME. SUB-SECTION (2) OF SECTION 14A PROVIDES THE PROCEDURE FOR DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER. THE BOARD HAS ALSO PRESCRIBED RULE 8D FOR DETERMINING THE EXP ENDITURE INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. THUS, THE DISALLOWANCE CAN BE MADE UNDER SUB-SECTION (1) FOR THE EXPENDITU RE INCURRED FOR EARNING OF EXEMPT INCOME. IN THE CASE UNDER APPEAL BEFORE US, FROM THE PERUSAL OF THE ASSESSEES PROFIT & LOSS ACCOUNT , IT IS EVIDENT THAT THE TOTAL EXPENDITURE INCURRED WAS RS.49,04,028/- O NLY. THUS, THE ASSESSEE CLAIMED THE DEDUCTION FOR THE EXPENDITURE OF RS.49,04,028/- WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE DISALLOWANCE CANNOT EXCEED THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSE SSEE. WE, THEREFORE, ACCEPT THE ASSESSEES CONTENTION THAT TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARN ED CIT(A) IN EXCESS OF TOTAL EXPENDITURE DEBITED TO PROFIT & LOSS ACCOU NT WAS UNJUSTIFIED. ACCORDINGLY, WE RESTRICT THE DISALLOWANCE TO THE EX TENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE I.E. RS. 49,04,028 /-. FURTHER, MUMBAI TRIBUNAL IN AFL PVT. LTD. THE CO-OR DINATE BENCH OF THIS TRIBUNAL HELD AS UNDER: IN OUR CLEAR VIEW, THEREFORE, THE INITIAL ONUS TO STATE ITS CASE QUA THE CLAIMED DISALLOWANCE UNDER SECTION 14A IS ON THE AS SESSEE, WHICH IS TO BE MADE WITH REFERENCE TO ITS ACCOUNTS AND/OR OTHER RECORDS, WITH THE ASSESSING OFFICER OBLIGED TO ALLOW THE ASSESSEE AN OPPORTUNITY TO PROVE THE SAME. THEN THE ASSESSING OFFICER IS TO EX AMINE THE SAME WITH A VIEW TO SATISFY HIMSELF AS TO ITS CORRECTNES S, STATING THE REASONS FOR HIS OBJECTIVE SATISFACTION, OR NOT SO, AS THE C ASE MAY BE, AND PROCEED ACCORDINGLY. IN THE INSTANT CASE, THE SAID INITIAL ONUS HAVING BEEN CLEARLY NOT DISCHARGED BY THE ASSESSEE, WHICH FINDING HAS BEEN ENDORSED BY US, THE DISALLOWANCE CANNOT BE IMPUGNED FOR WANT OF NON -COMPLIANCE OF THE PROCEDURE LAID DOWN UNDER SECTIO N 14A(2). AGAIN, HOWEVER, AS WE OBSERVE, NONE OF THE PARTIES OR THEI R REPRESENTATIVES HAVE EVEN AS MUCH AS CARED TO LOOK AT THE FACTS, WH ICH PRIMA FACIE REFLECT AN APPARENT CASE OF BANK BORROWINGS HAVING BEEN AVAILED FOR AND UTILISED FOR SPECIFIED PURPOSES, SO THAT THE IN TEREST THERE ON COULD NOT BE SUBJECT TO APPORTIONMENT ON THE BASIS OF GEN ERAL POOL OF FUNDS HYPOTHESIS, WHICH WOULD OTHERWISE PREVAIL. WE CAN O NLY EXPRESS OUR ANGUISH AT THIS CLEAR DISREGARD FOR FACTS, WHICH AR E OF PRIME RELEVANCE 5 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. IN DECIDING ANY CASE; ON THE CONTRARY, RAISING A HO ST OF IRRELEVANT LEGAL ISSUES BEFORE US. THE MATTER MUST, THEREFORE, TRAVEL BACK TO THE FILE OF THE ASSESSING OFFICER TO ALLOW THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE IN THE MATTER, WHO SHALL DECIDE THE SAME IN ACCORDANCE WITH THE LAW, ISSUING DEFINITE FINDINGS OF FACT. TH E RELEVANT GROUNDS ARE DECIDED ACCORDINGLY. IN ACIT VS. MAGARPATTA TOWNSHIP DEVELOPMENT AND CON STRUCTION CO. LTD. (SUPRA) THE CO-ORDINATE BENCH OF PUNE TRIBUNAL WHIL E DEALING WITH THE ALMOST IDENTICAL GROUND HELD AS UNDER: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN SO FAR AS THE PROVISIONS OF SECTION 14A OF THE ACT IS CONCERN ED, IT CONTEMPLATES THAT FOR THE PURPOSES OF COMPUTING TOTAL INCOME NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF ANY EXPENDITURE INCURRED IN R ELATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, ASSESSEE WAS FOUND TO HAVE EARNED EXEMPT INCOME BY WAY OF DIVIDEND ON INVESTMENTS MADE IN THE MUTUAL F UNDS. THE EXISTENCE OF SUCH EXEMPT INCOME PROMPTED THE ASSESS ING OFFICER TO INVOKE SECTION 14A OF THE ACT WHILE COMPUTING THE T OTAL INCOME OF THE ASSESSEE. FURTHER, THE ASSESSING OFFICER INVOKED RU LE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE. OSTENSIBLY, SUB-SECTIO N (2) OF SECTION 14A OF THE ACT ENABLES THE ASSESSING OFFICER TO INV OKE RULE 8D OF THE RULES SO AS TO DETERMINE E AMOUNT OF EXPENDITURE IN CURRED IN RELATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, THE PHRASEOLOGY OF SUB-SECTION (2) OF SECTION 14A O F THE ACT ITSELF BRINGS OUT THAT THE POWER OF THE ASSESSING OFFICER TO INVOKE RULE 8D OF THE RULES IS SUBJECT TO THE CONDITION THAT THE ASSE SSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATI SFIED WITH THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TO INCOME I.E. EXEMPT INCOME. IT IS NO LONGER RES-INTEGRA THAT INV OKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IS NEITHER AUTOMATIC AND NOR IS DEPENDENT MERELY ON TH E EXISTENCE OF AN EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. IN SUPP ORT OF THE AFORESAID PROPOSITION, A GAINFUL REFERENCE CAN BE M ADE TO THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AS WELL AS THE JUDGEMEN T OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT L TD. V. CIT [2011] 15 TAXMANN.COM 390/203 TAXMAN 364. THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF KALYANI STEELS LTD. (SUPRA) HAS ALSO CONSIDERED THE AFORESAID JUDGEMENTS AND CONCLUDED THAT SECTION 14A(2) OF THE ACT ENVISAGES A CONDITION PRECEDENT FOR INVOKING RULE 8 D OF THE RULES AND COMPUTING DISALLOWANCE; AND, SUCH CONDITION BEING T HAT THE ASSESSING OFFICER RECORDS THAT HE IS NOT SATISFIED WITH THE C ORRECTNESS OF THE 6 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INC URRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. NOTA BLY, THE AFORESAID PRECEDENTS ALSO BRING OUT THAT THE SATISFACTION WHI CH IS MANDATED IN TERMS OF SECTION 14A(2) OF THE ACT MUST BE BASED ON REASONS AND ON RELEVANT CONSIDERATION. IN OTHER WORDS, THE INVOKIN G OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IS TO BE UNDERSTOOD AS BEING CONDITIONAL ON RECORDING OF AN OBJECTIVE SATISFACTION BY THE ASSESSING OFFICER WITH REGARD T O THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDIT URE IN RELATION TO THE EXEMPT INCOME, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IN OUR CONSIDERED OPINION, THE AFORESAID PARITY OF REASONI NG IN RELATION TO INVOKING OF RULE 8D OF THE RULES READ WITH SECTION 14A OF THE ACT APPLIES TO THE FACT OF THE PRESENT CASE. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, W E MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE. AS NOTED EARLIER, AS SESSEE HAS EARNED DIVIDEND INCOME OF RS. 2,75,483/- ON INVESTMENT IN MUTUAL FUNDS. IN THE COURSE OF PROCEEDINGS BEFORE THE LOWER AUTHORIT IES, APART FROM OTHER ASSERTIONS, ASSESSEE CLAIMED THAT NO EXPENDIT URE WAS INCURRED IN RELATION TO EARNING OF SUCH INCOME. FIRSTLY, IT WAS POINTED OUT THAT THE DIVIDEND ON MUTUAL FUNDS WAS EARNED ON INVESTMENT M ADE FOR ABOUT TWO MONTHS ONLY I.E. JANUARY AND FEBRUARY, 2009 (AS FOUND FROM EXTRACT OF ASSESSEE'S SUBMISSIONS TO THE CIT(A) REP RODUCED IN PARA 3.1 OF HIS IMPUGNED ORDER). ON THE SAID BASIS, THE CASE SETUP BY THE ASSESSEE IS THAT THE FUNDS WERE PARKED IN MUTUAL FU ND BY THE BANK FOR A TEMPORARY PERIOD; AND, THAT IT HAD MORE THAN ENOUGH NON-INTEREST BEARING FUNDS BY WAY OF SHARE CAPITAL AND ACCUMULAT ED PROFITS TO COVER THE IMPUGNED INVESTMENT. THUS, NO INTEREST WA S INCURRED IN RELATION TO THE INVESTMENT IN MUTUAL FUNDS, WHICH Y IELDED THE IMPUGNED INCOME. SECONDLY, IT WAS POINTED OUT THAT THE DIVIDEND WAS CREDITED TO THE BANK ACCOUNT DIRECTLY BY THE BANK I .E. HDFC AND IT HAS ALSO BEEN ASSERTED THAT THE INVESTMENT IN THE MUTUA L FUNDS WERE ALSO MADE BY THE SAME BANK. IT WAS THEREFORE CONTENDED T HAT THERE WAS NO DIRECT OR INDIRECT EXPENDITURE INCURRED IN RELATION TO EARNING OF THE IMPUGNED EXEMPT INCOME. 9. IN PARA 4.2 OF THE IMPUGNED ORDER, THE CIT(A) NO TES THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE AVAILABILITY OF INTEREST-FREE FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE IN T HE MUTUAL FUNDS DURING THE YEAR. THE CIT(A) FURTHER NOTES THAT THE ASSESSING OFFICER CONSIDERED INTEREST EXPENDITURE OF RS. 3,00,19,761/ - AS EXPENDITURE NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND SUBJECTED THE SAME TO DISALLOWANCE AS PER CLAUSE (I I) OF SUB-RULE (2) OF RULE 8D OF THE RULES. AS PER THE CIT(A), THE MANNER AND THE WORKING FOR CONSIDERING RS.3,00,19,761/- FOR THE PURPOSES O F CLAUSE (II) OF SUB- RULE (2) OF RULE 8D OF THE RULES HAS NOT BEEN RECOR DED BY THE ASSESSING OFFICER IN HIS ORDER. THE CIT(A) FURTHER RECORDS TH AT THE ASSESSING 7 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. OFFICER HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESS EE SO AS TO ARRIVE AT A SATISFACTION AND FINDING REGARDING INCURRENCE OF DIRECT OR INDIRECT EXPENSES IN CONNECTION WITH EARNING OF THE EXEMPT I N ME AS REQUIRED BY SUB-SECTION (2) OF SECTION 14A OF THE ACT. THE C IT(A) ALSO OBSERVED THAT ASSESSEE HAS MADE THE INVESTMENT FROM OWN FUND S AND THEREFORE QUESTION OF ANY EXPENSE ON ACCOUNT OF INTEREST FOR EARNING OF IMPUGNED EXEMPT INCOME, 'IN THE GIVEN SET OF FACTS AND CIRCUMSTANCES OF THE CASE, DOES NOT ARISE. 10. PERTINENTLY, WE FIND NO SUCH REASONS TO DISTRAC T FROM THE AFORESAID FINDINGS OF THE CIT(A) WHICH ARE CLEARLY BORNE OUT BY THE MATERIAL ON RECORD. IN-FACT, DISCUSSION IN THE ASSESSMENT ORDER , WHICH HAS BEEN REFERRED TO BY THE LEARNED CIT-DR BEFORE US DOES NO T SHOW AS TO HOW THE CATEGORICAL ASSERTIONS OF THE CIT(A) ARE WRONG. THOUGH, THE ASSESSING OFFICER DOES SAY THAT HE IS 'NOT SATISFIE D WITH THE CORRECTNESS OF THE CLAIM 0 EXPENDITURE MADE BY THE ASSESSEE' SO HOWEVER, THE SAME IS MERELY A BALD ASSERTION, DEVOI D OF ANY OBJECTIVE ANALYSIS OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE , A MANDATORY REQUIREMENT OF SUB-SECTION (2) OF SECTION 14A OF TH E ACT. THEREFORE, IN THE ABSENCE OF ADHERENCE TO THE REQUIREMENTS OF SEC TION 14A(2) OF THE ACT, THE ASSESSING OFFICER COULD NOT HAVE PROCEEDED TO INVOKE RULE 8D OF THE RULES AND SUBJECT THE IMPUGNED INTEREST EXPE NDITURE FOR DISALLOWANCE AS PER CLAUSE (II) OF RULE 8D OF THE R ULES. SIMILARLY, THE CIT(A) RECORDS ANOTHER FINDING WHICH IS TO THE EFFE CT THAT THE DIVIDEND RECEIPT HAS BEEN DIRECTLY CREDITED INTO THE BANK AC COUNT OF THE ASSESSEE, THUS 'LEAVING NO SCOPE FOR INCURRING ANY OTHER EXPENSES FOR EARNING EXEMPT INCOME' BY THE ASSESSEE. FOR THE SAI D REASON, THE INDIRECT EXPENDITURE SOUGHT TO BE DISALLOWED BY INV OKING CLAUSE (III) TO SUB-RULE (2) OF RULE 8D OF THE RULES HAS ALSO BEEN FAULTED BY THE CIT(A). ON THIS ASPECT, WE ARE IN AGREEMENT WITH TH E CIT(A) THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE , THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING RULE 8D OF TH E RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A(L) OF THE ACT. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY AFFIRM THE ACTION O F THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.20,66,011/- MADE BY THE ASSESSING OFFICER INVOKING SECTION 14A OF THE ACT. THUS, ON T HIS ASPECT, REVENUE FAILS AND ACCORDINGLY THE GROUNDS OF APPEAL NO.1 TO 3 ARE DISMISSED. 5. NOW COMING TO THE FACTS OF THE PRESENT CASE. THE S UO MOTU DISALLOWANCE BY THE ASSESSEE COMPANY, COMPRISES IN THE MAIN, INTERE ST EXPENDITURE (I.E. RS 7.40 LACS), IN RESPECT OF WHICH NO INFIRMITY HAS BE EN POINTED OUT BY THE REVENUE DESPITE THE ASSESSEE FURNISHING COMPLETE DE TAILS IN ITS RESPECT, I.E., THE RELEVANT BORROWING AND THE INTEREST SUFFERED TH EREON. SIMILARLY FOR THE BALANCE EXPENDITURE OF RS.52,108/-, WHICH HAS BEEN DISALLOWED IN THE MAIN, 8 ITA NO. 7437/MUM/2013- M/S SNK INVESTMENT P. LTD. I.E., AT RS.48,096/-. THE REVENUE HAS PROCEEDED IN MATTER ARBITRARILY, AND WHICH IS PRECISELY THE CHECK PROVIDED BY SEC 14A(2) , WHICH IS TO BE SATISFIED IF RULE 8D IS TO BE INVOKED. WE ACCORDINGLY FIND NO REASON TO SUSTAIN THE IMPUGNED DISALLOWANCE. WITH THE ABOVE OBSERVATION, THE APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH AUGUST, 2016. SD/- SD/- (SANJAY ARORA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED /08/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/