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TMI Blog2014 (4) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008. The AO is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act – thus, the matter is remitted back to the AO for fresh consideration as to the analysis of administrative expenses shown by the assessee and to examine the nature of interest expenditure and if the interest expenditure does not pertain to any investment which has yielded or is capable of yielding any exempt income, then such interest expenditure cannot be allocated or can be considered for making any disallowance and if general administrative expenditure cannot be properly allocated or attributable for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard together and are being disposed of by way of this consolidated order. However, in order to understand the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the appeal in ITA no. 7883/Mum./2011, for assessment year 2002 03. 4. Facts in brief: The assessee is engaged in the business of financing and investments and the major source of income is by way of dividend and interest income. In this case, the disallowance under section 14A was made by the Assessing Officer vide order dated 24th March 2005 and the matter had travelled up to the stage of the Tribunal. The Tribunal, vide order dated 28th May 2008, had set aside the disallowance of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or may not be in the same proportion as the receipts earned from different sources of income. Having regard to these aspects we are of the view that expenditure incurred by the assessee for these two years is required to be allocated amongst different sources of income first. Even if an accurate calculation of actual expenditure cannot be made, an attempt should be made to make an estimate of expenditure attributable to various sources of income as near actual basis as possible on the basis of facts that may be brought on record by the assessee. We therefore restore this issue for both these assessment years back to the file of the learned Assessing Officer for decision afresh after allowing the assessee reasonable opportunity of being he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument is that, if 0.5% is taken on the average investment, for the purpose of disallowance, then those investments should be excluded which are not capable of yielding exemt income. He drew our attention to such investments given in the paper book. Lastly, he submitted that the addition made by the Assessing Officer and confirmed by the learned Commissioner (Appeals) is not in consonance with the directions given by the Tribunal in the first round of proceedings. 7. The learned Departmental Representative, on the other hand, submitted that looking to the factum of the expenditure and also the quantum of expenditure debited in the Profit Loss account, the amount disallowed by the Assessing Officer under section 14A is very reasonable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are not capable of yielding any exempt income i.e., any income generated out of the said investments are taxable. A list of such investment has been placed in the paper book at Page 25 and 26. This contention of the learned Counsel appears to be correct, because the disallowance under section 14A, is triggered when the assessee claims any expenditure in relation to an income, which does not form part of the total income i.e., it is exempt from taxation. Thus, while working out any disallowance those investments should be removed, from where there is no scope of earning any exempt income. The learned Counsel had also submitted before us the analysis of the various expenditures debited in the Profit Loss account which are exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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