9911796707
TMI Blog2014 (6) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate ORDER Per: Challa Nagendra Prasad: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Chennai dated 24.03.2011 for the assessment year 2006-07. The only grievance of the Revenue is that Commissioner of Income Tax (Appeals) erred in deleting the disallowance made under section 14A of the Act. 2. The Assessing Officer while completing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Rule 8 D are not applicable for the assessment year 2006-07, still reasonable disallowance should be made. He relies on the decision of the Hon'ble Madras High Court in the case of M/s. Simpson & Co. Ltd., Vs. DCIT in Tax Case (Appeal) No.2621 of 2006 dated 15.10.2012 and submits that 2% of dividend income is reasonable disallowance under section 14A of the Act. 4. Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the facts of the case, the reasons given by the assessing officer and the submissions of the AR. From the records it is seen that as on 31-03- 2006, the total share capital and reserves and surplus as on 31-03-2006 was Rs.3,87,80,417/- and unsecured loan of Rs.47,82,24,831/-. Assessee company was having investments in the form of quoted and unquoted equity shares to the tune of Rs.25,99,54,080/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect nexus between the interest expenditure and dividend income. In the present case assessee has established the nexus between the interest expenditure and interest income earned. The investments from which dividend income "earned was found to have been made in the earlier years and out of its internal accruals. In CIT Vs. Hero Cycles 323 ITR 518 (P&H) it was held that disallowance u/s 14A require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the order of the Commissioner of Income Tax (Appeals) that deduction of 2% managerial expenses had to be made while calculating the deduction under section 14A of the Act. Following the said decision, we direct the Assessing Officer to restrict the deduction to 2% of the dividend income earned by the assessee as expenditure attributable for earning dividend income. 7. In the result, appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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