9911796707
TMI Blog2014 (1) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of an individual is different while computing disallowance under section 14A, as compared to all other forms of business. 3. Both the lower authorities erred in applying Rule-8D without recording objective dissatisfaction with the correctness of the claim of the assessee, having regard to his account. 4. The Ld CIT (A) erred in not deleting interest levied under section 234D. The appellant denied his liability to be levied the said interest. 5. The Ld CIT (A) erred in not restricting the levy of interest under section 234C to Rs. 37,877/- as computed by the appellant." 3. Before us, at the outset, Shri M.M. Golvala, Ld Counsel for the assessee mentioned that ground no.4 & 5 are not pressed. Therefore, after calling ld DR's comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend income of Rs. 32,78,351/- in the year under consideration. It is the claim of the assessee that no expenditure whatsoever was incurred for earning of such dividend income out of the administrative and other expenditure debited to P and L account. However, the AO did not accept the said claim of the assessee. Consequently, relying on the Special Bench decision in the case of M/s. Daga Capital Management Pvt. Ltd. vide ITA No.8057/M/2003 , AO invoked the provisions of section 14A of the Act and quantified the disallowance at Rs. 1,78,460/-, which is equalant of 0.5% of the average value of the said investment. AO added the same to the income returned by the assessee. Aggrieved with the same, assessee filed an appeal before the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact that assessee has not claimed any expenditure whatsoever in the books of accounts which is relatable to the exempt income. Assessee's failure to maintain separate books of accounts showing the expenditure relatable to the exempt income was discussed too. Finally, CIT (A) rejected the assessee's claim that no expenditure was incurred and also the alternative claim of disallowance of Rs. 10,000/- to 15,000/- before the confirming the order of the AO. In the result, CIT (A) confirmed the addition of Rs. 1,78,460/- and applicability of the provisions of rule 8D of I T Rules '62 r w s 14A of the Act. Aggrieved with the same, assessee filed the present appeal before the Tribunal. 6. During the proceedings before us, Shri Shri M.M. Gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the P & L Account of M/s Pundole Exports and it is impossible that no part of expenditure is incurred directly or indirectly for the purpose of making of the investment in shares and earning of the dividend income. In this regard, he brought our attention to the written submissions (page 32 of the Assessee's PB) made before the lower authorities and mentioned that the assessee maintained certain accounts like driver, office boy etc, whose services are often used to encash the dividend warrants. Mentioning that the provisions of section Rule 8D are applicable to the AY 2008-2009 onwards, Ld DR submitted that there is a need for making disallowance in accordance with the method prescribed in the Income Tax Rules. Referring to the Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-taxable income. Thus, in case of receipts which are not taxable, disallowance under section 14A would come into play, as in the present case where dividend income has been received. Expenses have been incurred on making and managing investments. Dividends have also been arisen out of investments made. Apart from expenses which can be attributed specifically to the business of the appellant, there are general administrative expenses, which would be indirectly attributable towards earning exempt income. The Assessing Officer has spelt out in his order that manpower and other administrative factors have been utilized for earning the said income. Thus, it can be clearly concluded that there are expenses indirectly used for earning the non-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate accounts for his investment activities. The expenditure accounts are commonly maintained. The inclusion of disallowable expenditure u/s 14A of the Act in such common accounts is certainly a possibility as held by the Tribunal in many other cases. Hence, there is great amount of possibility that some of the expenditure incurred and debited to P & L account of Pundole Exports must relate to the exempt income of the assessee. Therefore, in that point of view, the argument made by Ld DR has merit. Considering the fact the disallowance made by the AO is reasonable and in accordance with the provisions of section 14A of the Act read with Rule-8D of the Act. Regarding the recording of the satisfaction of the AO with regard to the correctness ..... X X X X Extracts X X X X X X X X Extracts X X X X
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