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TMI Blog2013 (2) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out the disallowance u/r. 8D. Thus the exclusion of 'share application money' is not in the least for the reason that it did not yield any tax-free income for the relevant year, but for the reason that it is incapable of any such income. The same is only in the nature of application (offer) money, which would though, on allotment, get adjusted against the cost of the said shares, and only whereupon any rights in the investee company inure to the allottee. No rights, not even inchoate, in the share capital of the issuing company arise on the payment of the share application money, irrespective of the time period for which it may outstand. The same may at best yield interest income (for which a special procedure though has to be follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and loss account, filed along with, disclosed dividend income at Rs. 50,000/-, which had been claimed exempt by the assessee per its return, section 14A r.w.r. 8D was attracted. In fact, the assessee had itself made a disallowance to the extent of Rs. 1,09,783/- u/s.14A. As per the Assessing Officer (A.O.), the same, however, worked out to Rs. 10,30,481/- in terms of rule 8D (of the Income Tax Rules, 1962), so that he framed the assessment accordingly. The same having been since confirmed by the ld. CIT(A), the assessee is in second appeal. 3. Before us, the assessee's principal contention was that it did not dispute the invocation of section 14A r/w r. 8D, but it's application; the disallowance in the facts of the case exceeding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties below, stating that irrespective of the quantum of the tax-free income, the provision read with rule 8D being mandatory, would have to be applied. The ld. CIT(A) has, in any case, given appropriate relief in the matter, so that no further relief is called for. 4. We have heard the parties, and perused the material on record. Section 14A r/w r. 8D is mandatory in its application where the assessee earns income which is claimed tax-exempt, as dividend income in the instant case. In fact, there is no doubt with regard to this; the assessee itself conceding to the same before us and, besides, being engaged in the business of making investments and earning dividend income as an integral part thereof. The only option, therefore, if it cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exclusion of 'share application money', as opined by us, is not in the least for the reason that it did not yield any tax-free income for the relevant year, but for the reason that it is incapable of any such income. The same is only in the nature of application (offer) money, which would though, on allotment, get adjusted against the cost of the said shares, and only whereupon any rights in the investee company inure to the allottee. No rights, not even inchoate, in the share capital of the issuing company arise on the payment of the share application money, irrespective of the time period for which it may outstand. The same may at best yield interest income (for which a special procedure though has to be followed by the company conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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