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TMI Blog2010 (12) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... 010, ITA No. 1048/Mum/2010, ITA No. 1049/Mum/2010, - - - Dated:- 22-12-2010 - N.V. Vasudevan, T.R. Sood, JJ. Chetan K. Karia for the Appellant Hari Govind Singh for the Respondent ORDER N.V. Vasudevan: These are appeals by the assessee against common order dated 4/12/2009 of CIT(A)XXXVIII, Mumbai relating to assessment years 2005-06 to 2007-08. The common issue involved in all these three appeals is with regard to disallowance of expenses alleged to have been incurred by the Assessee to earn income which does not form part of the total income and therefore to be disallowed under the provisions of section 14A of the Income Tax Act 1961 (the Act). 2. The assessee is a company. It carries on the business of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the total income of the Assessee and therefore any expenditure incurred to earn dividend income cannot be allowed as a deduction while computing total income of the Assessee in view of the provision to that effect in Sec.14-A of the Act. According to the assessee the entire investment was made out of own funds and out of various interest free deposits received from members. According to the assessee it had not incurred any direct expenses to earn dividend income, which did not form part of the total income of the assessee. The assessee however, worked out the indirect expenses to earn dividend income at Rs.71,744/-, Rs.2,70,837/- and Rs.4,34,677/- for assessment year 2005-06, 2006-7 and 2007-08 respectively. The indirect expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Income Tax Range 10(2), Mumbai and Ors. by Judgment dated 12-8-2010 has dealt with the disallowance that can be made u/s.14-A of the Act. The Hon'ble Court also dealt with the decision of the Special Bench of the ITAT in the case of Daga Capital Management Pvt. Ltd. 117 ITD 169 (Mum) (SB) and has laid down the following proposition: i) Dividend income and income from mutual funds falling within the ambit of Section 10(33) of the Income Tax Act 1961, as was applicable for Assessment Year 2002-03 is not includible in computing the total income of the assessee. Consequently, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; vii) The proceedings for Assessment Year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income/income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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