TMI Blog2014 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Assessee was receiving a fee of Rs.1.55 crores - against the income assessee claimed expenses only of Rs.51.80 lacs which is 33.5% of professional income - assessee made capital investment of Rs.16.00 lacs by way of fixed capital in the partnership firm and has not paid any interest on borrowings for the purpose of making investment in the partnership firm - investment was made out of own funds/non-interest bearing funds which is evident from Profit & Loss A/c - interest expenditure debited to Profit & Loss A/c was in respect of car loan - thus no disallowance is warranted u/s 14A - no expenditure was claimed in Profit & Loss A/c which can be directly or indirectly attributed to earning of share of profit from the firm – thus, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained vide letter dated 14.12.2011 that the amount of expenses incurred by him are not for earning just his partner s share of profit but for earning professional fees. Further, there are no expenses specifically incurred for earning his share of profit. The AO observed that the assessee has also cited some case laws where the main reason for non disallowance u/s.14A was that the share of profit of the firm cannot be strictly called as tax free as it is already taxed in the hands of the firm. However, the AO was of the view that the partners and firms are two separate taxable entities and therefore, the treatment of any income in one s hand cannot be affected its nature in other s hand. Moreover, the dividends are taxed initially in the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd remuneration from the firm. The Mumbai Tribunal, J Bench in the case of Pallavi Shardul Shroff, Partner of M/s. Amarchand Mangaldas firm [ITA 3511/Mum/2010] AY 05-06 dated 27/4/11 has held that that the shares of profit of the firm has no nexus with expenditure incurred on car by the assessee. All the expenditure are booked in the firm s account and the expenditure incurred on car cannot to be having any nexus with the earning of shares income from the firm. The motor car expense and salary to driver cannot be attributed to earning shares of profit from firm. The appellant has not claimed any expenditure in relation to exempt income. Therefore, there is no proximate cause for disallowance in relationship with exempt income as held in CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowings for the purpose of making investment in the partnership firm. Such investment was made out of own funds/non interest bearing funds which is evident from Profit Loss A/c. We find that interest expenditure debited to Profit Loss A/c was in respect of car loan amounting to Rs.66,739/-. Thus no disallowance is warranted u/s. 14A. Since no expenditure was claimed in Profit Loss A/c which can be directly or indirectly attributed to earning of share of profit from the firm. 3.1. In the instant case also while deleting the disallowance CIT(A) has recorded a categorical finding that expenditure of Rs.51.80 lacs was not incurred in relation to exempt income. Finding so recorded by CIT(A) has not been controverted by department by br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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