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TMI Blog2012 (2) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany filed its return on 30.09.2008 declaring total income of ₹ 8,77,16,454/-. The assessment proceedings were initiated by issuing notices under sec. 143(2) and 142(1) of the Act. In the course of hearing, it was found that the assessee has made investment in shares, the income from which is not includible in the total income. Therefore, the assessee was required to show cause as to why disallowance should not be made in view of the provisions contained in sec. 14A of the Act read with Rule 8D of the Income-tax Rules, 1962. It was submitted that the assessee has not incurred any expenditure in earning taxfree income and, therefore, no disallowance has been made under aforesaid provisions. The Assessing Officer did not accept this su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in this year. Further, investment of ₹ 1 crore was made in shares of Poley Designs Pvt. Ltd. The investment was made at face value and this share is not quoted on any Stock Exchange. Investment of ₹ 2,50,24,988/- was also made in unquoted shares of Vertebrand Management Consulting Pvt. Ltd., the wholly owned subsidiary company. Thus, the investments at the end of the year stood at ₹ 3,50,24,988/-. 2.1 The case of the learned counsel is that the assessee had not disallowed any amount as expenditure incurred in earning tax-free income. The lower authorities have not recorded any reason to show that this assertion was wrong. Without doing so, they could not have disallowed any portion of the expenditure debited in prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 57(iii) deals with any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning the income. In a number of cases decided under this provision, it has been held that actual earning of the income is not sine qua non for deciding the deduction of expenditure laid out or expended wholly or exclusively for the purpose of earning the income. Thus, where investment has been made in shares, which did not yield any dividend in the year under consideration, the expenditure incurred for earning the income is deductible notwithstanding the fact that no such income has been earned. We are of the view that ratio of these cases will apply mutatis mutandis under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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