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TMI Blog2008 (3) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(33) of the Act. On the other hand, the assessee has categorically denied of having incurred any expenditure for earning such exempted income. In the instant case, the relevant assessment years under consideration are 2001-02 and 2002-03, to which the provisions of sub-sections (2) and (3) of section 14A is not applicable. The expenses for earning exempt income cannot be allowed to be deducted while computing any taxable income, however, at the same very time under section 14A of the Act, it is for the revenue to prove that the expenditure are incurred in relation to income which does not form part of total income. In the absence of such findings, the Assessing Officer is not entitled to presume on an ad hoc basis that some p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i dated 1-8-2005 and 22-3-2005 for the assessment years 2002-03 and 2001-02 respectively, in the matter of order passed under section 143(3) of the Income-tax Act, 1961, wherein following grounds of appeals have been taken: Grounds taken in ITA No. 3889/Del./05 : "That the learned CIT (Appeals) XIV, New Delhi has wrongly upheld the decision of ACIT(OSD), Ward 1(3), New Delhi for disallowing a sum of Rs. 7,67,706 out of personnel and administration expenses under section 14A of the Income-tax Act on an ad hoc and arbitrary basis on the assumption that these expenses were incurred for earning dividend income claimed to be exempt under the Income-tax Act. That the assessee prays for the leave to add, amend or vary the above grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uti Udyog Limited v. Dy. CIT [2005] 92 ITD 119 (Delhi) and Wimco Seedling Ltd. v. Dy. CIT [2007] 107 ITD 267 (Delhi) (TM) in support of the proposition that Assessing Officer has no authority to make ad hoc disallowance. 4. On the other hand, learned DR relied on the orders of lower authorities and contended that certain disallowance of common expenses in impera-tive which might have been incurred for earning the exempted income. 5. We have considered the rival contentions and find from the record that during the years under consideration, the assessee claimed dividend income as exempt under section 10(33) of the Act. The Assessing Officer asked the assessee to explain as to why disallowance under section 14A be not made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure which is assumed to have been incurred for earning tax-free income. While applying the section, there is no authority conferred by the section upon the Assessing Officer to deem or assume certain expenditure to have been incurred in relation to the tax-free income. Accordingly, common expenditure incurred cannot be broken artificially to attribute for apportioning a part thereof to the earning of the tax-free income on the assumption that such part of the common expenditure was incurred in relation to the tax-free income. 7. Unlike the other provisions of the Income-tax Act, 1961 relating to allowance of various expenditure while computing business income, the provisions of section 14A deals with disallowance of expenditure incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by Finance Act, 2006 which was to come into force with effect from assessment year 2007-08 onwards, according to which authority was given to the Assessing Officer to determine on the basis prescribed therein, the amount of expenditure incurred in relation to income which is exempt from income-tax. In the instant case, the relevant assessment years under consideration are 2001-02 and 2002-03, to which the provisions of sub-sections (2) and (3) of section 14A is not applicable. The expenses for earning exempt income cannot be allowed to be deducted while computing any taxable income, however, at the same very time under section 14A of the Act, it is for the revenue to prove that the expenditure are incurred in relation to income which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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