2008 (7) TMI 1005 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the disallowance of proportionate expenditure in respect of exempted dividend income by the Assessing Officer, the decision of the Commissioner of Income Tax (Appeals) to delete the addition, and the rejection of the revenue's appeal by the Income Tax Appellate Tribunal.

Disallowance of Proportionate Expenditure:
The assessee, engaged in various activities including running a business center and earning dividend income, claimed exemption for the dividend income without claiming any expenses against it. The Assessing Officer disallowed proportionate expenditure and added &8377; 11,68,796. The Commissioner of Income Tax (Appeals) deleted this addition, stating that the Assessing Officer's estimation of expenses was based on surmises and conjectures.

Decision of Income Tax Appellate Tribunal:
The Income Tax Appellate Tribunal rejected the revenue's appeal, noting that the Assessing Officer did not provide a cogent reason for disallowing the expenditure. The Tribunal emphasized that without material or basis for disallowance, making an estimate-based disallowance was unjustified. Considering the various activities of the assessee and the nature of dividend income, the Tribunal found no justification for the proportionate disallowance of expenditure.

Conclusion:
Both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal based their decisions on factual considerations, with no substantial question of law arising for the Court's consideration. Consequently, the Court dismissed the appeal filed by the revenue.