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TMI Blog2011 (4) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the AO the assessee ought to have deducted tax at source on the payment of maintenance charges to the society as the payment by the assessee to the society was in the nature of contract and, therefore, the provisions of section 194C was applicable. Under section 40(a)(ia) of the Act where assessee has an obligation to deduct tax at source before making payment and payment of maintenance charges to the society by the assessee was in the nature of payment to contractor for carrying out any work attracting the provisions of section 194C of the Act – Held that:- payment of maintenance charges by the owner of the premises to the society can by no stretch of imagination be said to be a payment to contractor for carrying out work on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee earned dividend income of Rs. 35,507/-. The dividend income did not found part of the total income of the assessee. In view of the provisions of section 14A of the Income Tax Act, 1961 (the Act) the AO was of the view that any expenditure incurred in earning income which does not form part of the total income under the Act should be disallowed while computing the total income of an assessee. The plea of the assessee before the AO was that there was no expenditure incurred in earning the dividend income. The assessee explained that it had invested surplus funds in mutual funds and earned dividend income. Further it was also submitted that there was no other direct or indirect expenses that was incurred to earn the dividend income. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 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 income under the Act, by virtue of the provisions of Section 1 4A( 1); ii) The payment by a domestic company under Section 115O(1) of additional income tax on profits declared, distributed or paid is a charge on a component of the profits of the company. The company is chargeable to tax on its profits as a distinct taxable entity and it pays tax in discharge of its own liability and not on behalf of or as an agent for its shareholders. In the hands of the shareholder as the recipient of dividend, income by way of dividend does not form part of the total income by virtue of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. 5. In view of the aforesaid decision of the Hon ble Bombay High Court the issue with regard to disallowance under section 14A has to be made in accordance with the principle laid down by the Hon ble Bombay High Court. Rule 8D should not be applied and the AO has to adopt a reasonable basis or method consistent with all relevant facts and circumstances and after affording reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194C of the Act. Since tax was not deducted at source while making payment, the AO invoked the provisions section 40(a)(ia) of the Act and added a sum of Rs. 1,72,455/- to the total income of the assessee. 8. On appeal by the assessee the CIT (A) confirmed the order of the AO, hence, ground No.2 by the assessee before the Tribunal. 9. We have considered the rival submissions. The payment of maintenance charges by the owner of the premises to the society can by no stretch of imagination be said to be a payment to contractor for carrying out work on behalf of the owner of the premises. These payments were made to defray common cause. There is no contract for maintenance between the society and the owner of the premises. It is a payment t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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