IN INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA No. 1524/Mds/2016 Assessment Year : 2009-10 Shri.Manjula Narayanan, Assistant Commissioner of NewNo.12, Old No.71, v. Income Tax, 3rd Main Road, Corporate Circle -5 (1), Kasturibai Nagar, Chennai 600 034. Adyar, Chennai 600 020. PAN: AAKPN7776J (Appellant) (Respondent) Appellant by : Ms.K.Hemalatha, C.A. Respondent by : Shri Supriyo Pal, JCIT Date of Hearing : 10.08.2016 Date of Pronouncement : 23.09.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: This appeal of assessee is directed against order of CIT(A) -3, Chennai dated 21.03.2016 and pertains to Assessment Year 2009-10. 2. Ms.K.Hemalatha, learned representative for assessee submitted that only issue arises for consideration is disallowance of 2 I.T.A. No.1524/Mds/2016 expenditure under Section 14A read with Rule 8D of Income Tax Rules. According to learned representative for assessee, Assessing Officer disallowed Rs.6,11,423/- under Section 14A of Act. assessee earned dividend of Rs.10,67,957/- on shares and Rs.33,25,474/- on securities and claimed same as exempt under Section 10(34) of Income Tax Act. assessee explained before Assessing Officer that no expenditure was incurred for earning exempted income and therefore, there cannot be any disallowance under Section 14A of Act. 3. On contrary, Shri Supriyo Pal, learned representative for department submitted that admittedly assessee earned exempted income and claimed exemption under Section 10(34) of Act. assessee claims that no expenditure was incurred. Therefore, Assessing Officer by applying provisions of Rule 8D(2) of Income Tax Rules computed disallowance. According to learned department representative, computation of disallowance under Section Rule 8D for purpose of earning exempted income is mandatory. Referring to Assessment Order, department representative submitted that assessing officer found that assessee has not incurred any direct expenditure for earning income. 4. Assessing Officer found that average investment as appearing in Balance Sheet as on first day of financial year and last day of financial year was Rs.12,22,84,722/-. Accordingly, by applying third limb of Rule 8D(2), estimated disallowance at 0.5% of investment which resulted in earning income which does not form part of total income. 3 I.T.A. No.1524/Mds/2016 Therefore, CIT has rightly confirmed disallowance made by Assessing Officer. 5. We have considered rival submissions on either side and also perused material available on record. assessee engaged in profession of book publication during year under consideration. assessee claimed before assessing officer that she has invested her own funds in shares and securities. assessee earned income of Rs.10,67,957/- from shares and Rs.33,25,474/- on securities. assessee claimed both income as exempted under Section 10(34) of Act. assessee claimed before assessing officer that no expenditure was incurred. This Tribunal is of considered opinion that when assessee claims that no expenditure was incurred or expenditure claimed is not correct, then, it is open to assessing officer to estimate expenditure for earning exempted income by applying provisions of Rule 8D of Income Tax Rules. In case before us, even though assessee claimed before assessing officer that no expenditure was incurred, assessing officer has estimated expenditure by applying Rule 8D. Therefore, this Tribunal do not find any reason to interfere with order of CIT(A). Accordingly, same is confirmed. 6. Now coming to estimation of expenditure, it is nobody s case that assessee has borrowed loan for purpose of making investment in shares and securities. No materials also are available on record to suggest that assessee borrowed loan for purpose of business. Therefore, it is 4 I.T.A. No.1524/Mds/2016 obvious that first and second limbs of Rule 8D(2) of Income Tax Rules is not applicable. Now, coming to third limb of Rule 8D(2), admittedly, investment made by assessee resulted in income which does not form part of total income. assessing officer computed average investment during year under consideration as Rs.12,22,84,722/-. This figure of Rs.12,22,84,722/- was taken from balance sheet filed by assessee. Therefore, this Tribunal is of considered opinion that Assessing Officer has rightly applied third limb of Rule 8D(2) and estimated expenditure at 0.5% of average investment which resulted in earning of income which does not form part of total income. Therefore, this Tribunal do not find any reason to interfere with order of CIT(A). Accordingly, same is confirmed. 7. In result, appeal of assessee is dismissed. Order pronounced on 23rd September, 2016 at Chennai. Sd/- Sd/- (A. Mohan Alankamony) (N.R.S. Ganesan) Accountant Member Judicial Member Chennai, /Dated, 23rd , 2016. sp. 5 I.T.A. No.1524/Mds/2016 Copy to: 1. /Appellant 2. /Respondent 3. CIT(A) 4. CIT, 5. DR 6. GF. Manjula Narayanan v. Assistant Commissioner of Income-tax, Corporate Circle -5 (1), Chennai