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2024 (4) TMI 345 - AT - Income TaxDisallowance u/s. 14A r.w. Rule 8D - expenditure related to the earning of exempted income - investment made in securities - as argued no direct or indirect expenditure in relation to investment in securities has been claimed or debited in the Profit and Loss Account by the appellant - HELD THAT - As decided in assessee own case 2015 (3) TMI 1334 - ITAT DELHI the expenditure related to the earning of exempted income like STT and brokerage were shown in the withdrawals. The assessee is also having personal drawings for the year under consideration. All these facts show that the assessee is not debiting the expenditure related to the exempted income in its Income Expenditure account and the revenue has failed to pinpoint any specific instance in this regard. Therefore, as following the same we allow this ground of assessee s appeal.
Issues Involved:
The issues involved in the judgment are the disallowance of expenses u/s 14A of the Income Tax Act, 1961 r.w. Rule 8D in relation to investments made in securities without a direct or indirect expenditure claimed, the establishment of a nexus between expenditure claimed and exempt income, and the contention that claimed expenditure has a direct nexus with professional income rather than exempt income. Summary of Judgment: 1. The appeal was filed against the Order of Ld. CIT(A)-20, New Delhi confirming the disallowance of Rs. 5,26,256/- u/s. 14A of the Income Tax Act, 1961 r.w. Rule 8D in relation to investments made in securities without direct or indirect expenditure claimed in the Profit and Loss Account by the appellant. The AO disallowed the amount citing expenses related to maintaining a large portfolio, including manpower, visiting banks, use of vehicle and telephone, internet, computer, depreciation, and more. The CIT(A) upheld the disallowance. 2. The assessee, a Doctor by profession, earned income from various sources and filed returns for the assessment year 2011-12. The AO noted exempt income as dividend and Long Term Capital Gain, invoking Section 14A to disallow direct and indirect expenditure related to income not forming part of total income. The AO held that the assessee did not provide a separate account for earning exempt income. The AR attended proceedings, providing necessary details and documents. The AO disallowed Rs. 5,26,256/- under rule 8D(2)(iii). 3. The assessee appealed to the Ld.CIT(A) challenging the disallowance, which was upheld. The assessee then appealed before the ITAT Delhi. 4. During the hearing, the AR submitted that a previous Tribunal order in the assessee's own case for AYrs 2009-10 and 2010-11 had decided similar issues in favor of the assessee. The AR argued that the findings in the previous order should apply to the current case as well, as the facts were identical. The Sr. DR did not contest this proposition. 5. The ITAT found that the facts and circumstances were the same as in the previous case, where the Tribunal had directed the AO to delete the disallowance of Rs. 5,26,256/- u/s. 14A. Relying on the previous decision, the ITAT allowed the appeal of the assessee. 6. The ITAT directed the AO to delete the disallowance of expenses made u/s. 14A, as the facts and circumstances were identical to the previous case where a similar disallowance was overturned. The appeal of the assessee was allowed. 7. The appeal was allowed, and the order was pronounced in the Open Court on 04th April, 2024.
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