ORDER

PER NAVEEN CHANDRA [A. M]:

The above captioned appeal is preferred by the Revenue against the order dated 27.11.2017, passed by Learned Commissioner of Income Tax (Appeals)-9, New Delhi (hereinafter referred to as ‘ld. CIT(A)), under section 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for Assessment Year 2016-17. The assessment order in this appeal is passed by the Assessing Officer [for short, AO]under section 143(3) of the Act.

2. The Revenue has raised following grounds of appeal:-

1. "The impugned order of the CIT (A) is bad in law as well as on facts of the case."

2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made u/s 14A of the Income Tax Act, 1961, the Ld. CIT(A) has erred on the fact in not considering the CBDT Circular 5/2014 dated 11.02.2014. Although the above circular has been overruled by the judgement, but the judicial position is not yet settled. "

3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance on account of legal and professional charges for Roof Top Restaurant and exploring business opportunity in southern India as there is no income generated from new business. These expenses has no business nexus with income of the assessee. "

4. "The Appellant craves, leave or reserving the right to amend, modify, alter, add or forego any of the Grounds) of Appeal at any time before or during the hearing of this appeal."

3. The Revenue has filed a revised ground of appeal as follows:

"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 2,01,26,936/- made u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. The Ld. CIT(A) failed to appreciate that the Assessing Officer had recorded valid satisfaction regarding the incorrectness of the assessee's claim and that the assessee had earned substantial exempt income of Rs. 19.49 Crores during the year."

4. The substantial issue raised by the Revenue is deletion of disallowance made under section 14A and deletion of disallowance on account of legal and personal charge for rooftop restaurant at HT House. Brief facts of the case is that the assessee has 12.90% of Exempt income as compared to total income which aggregates to Rs. 19,49,29,066/- comprising of (i) dividend of Rs. 17,34,47,052; and (ii) interest on tax free bonds of Rs. 2,14,82,014. The assessee has made suo-motu disallowance of Rs. 55,85,330 u/s 14A determined as- (i) 50% salary of two Key Managerial Personnels involved in investments and (i) proportionate miscellaneous/ administrative expenses. The AO made an additional disallowance of Rs.2,01,26,936 applying method under Rule 8D(2)(iii). The CIT(A) deleted the disallowance.

5. The ld counsel of the assessee stated that 93.25% of the dividend received from old strategic long-term investments hence there cannot be any basis to attribute any expense to earning exempt income. The ld AR further stated that it is incumbent upon the AO to considered the details and record an objective satisfaction, having regard to the accounts of the assessee that expenditure having proximate nexus to exempt income is incurred; in absence of valid satisfaction, mechanical application of Rule 8D is invalid and relied of the following decisions:-

H.T. Media Ltd. v. PCIT: [2017] 399 ITR 576 (Del)

Coforge Ltd vs. ACIT: [2021] 436 ITR 546 (Del)

6. The ld AR submitted that the AO has not pointed out any incurrence of actual expenditure having proximate nexus with earning of exempt income which is necessary to make disallowance u/s 14A and relied on the following decisions:-

CIT vs. Walfort Share & Stock Brokers: [2010] 326 ITR 1 (SC)

Godrej & Boyce Mfg. Co. Ltd. v. DCIT: [2010] 328 ITR 81 (Bom) affirmed in [2017] 394 ITR 449 (SC)

Maxopp Investment Ltd: [2012] 347 ITR 272(Del)

7. Per contra, the ld DR rel