आदेश/ORDER 

PER RAMIT KOCHAR, Accountant Member:

This appeal, filed by assessee, being ITA No. 6600/Mum/2017, is directed against appellate order dated 22.09.2017 in appeal no. CIT(A)-6/IT/8/2016-17, passed by learned Commissioner of Income Tax (Appeals)-6, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2010-11, the appellate proceedings had arisen before learned CIT(A) from the assessment order dated 05.03.2013 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”) for AY 2010-11.

2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-

“The Commissioner of Income Tax (Appeals) - 6, Mumbai erred:-

1.1 in confirming an addition u/s 14A of Rs. 34,93,693/-.

1.1.1 in holding that the method adopted by the Appellant to estimate expenses incurred, defied logic and in therefore confirming the applicability of Rule 8D.

1.1.2 in holding that there were no details available with him as to whether or not investments were strategic in nature, and merely on that reason not allowing the claim of the Appellant, instead of confronting the Appellant to file evidence related to the same.

1.1.3 in not holding that every such investment on which no income is earned must be excluded while applying Rule 8D since no income has been earned on the said investments (except on one investment).

The above grounds are without prejudice to each other.

The Appellant craves leave to add, alter or amend the grounds as may be advised from time to time.”

3. The brief facts of the case are that the assessee is engaged in manufacturing and sale of frozen foodstuffs products, provision of cold storage facilities for frozen foodstuffs and processing of polymer granules. The assessee has received dividend income of Rs. 4,01,399/- which was claimed as an exempt income u/s 10 of the 1961 Act. The assessee had invested in shares, bonds etc. of Rs. 69,69,33,223/- which is reflected in its Balance Sheet . The AO invoked provisions of Section 14A of the Act r.w.r. 8D of the 1962 Rules and the assessee was asked to explain as to why disallowances of expenditure incurred in relation to earning of an exempt income be not made. The assessee submitted before the AO as under:-

"The company earned dividend income of Rs. 401399/- which is exempt u/s 10. In this respect we submit that the receipt of dividend is represented by one dividend warrant. Direct and indirect expenses incurred in relation to earnings of this exempt dividend income of Rs. 3,717/- have been offered for disallowance.

The investments in shares of companies were made in the past and out of own funds. Further, all the expenses debited in Profit & Loss Account (broadly classifies in the schedules thereto) relate to the business activities of the company. There are neither interest costs nor any other direct/indirect costs associated with the investments made by the company.

The Honourable Bombay High Court, in a judgement in case of Godrej & Boyce Mfg. Co. Ltd., has held that disallowance u/s 14A should be made by applying the principles of apportionment of expenses (those incurred to earn exempt income and non exempt income) and based on proximate relationship between expenditure incurred and the income which does not form part of total income.

Without prejudice, we respectfully submit that a reasonable estimation of such expenses, at best, could be as follows;

We submit that under the circumstances and facts, the question of applying Rule 8D does not arise.."

Thus, the assessee had offered disallowance of