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TMI Blog2015 (10) TMI 2511X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. We find from records that the assessee filed the details of consultancy income and expenses incurred for the same before AO during the course of assessment proceeding but he has not considered the same. We further find that the dividend income amounting to 1,66,06,788/- was received by the assessee only from eight companies and dividend cheques were received though post or were directly credited to the assessee' bank account through ECS. As such no major expenses were incurred by the assessee for earning such income and collection of dividend cheque. Similarly, in respect of long term capital loss of 3,97,694/- there were only two transactions for purchase and sale of shares and two for investment and redemption of units of mutual f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the disallowance u/s. 14A of the Income Tax Act, 1961 to the extent of expenses claimed by the assessee during the year; whereas there is no such restriction in the provisions of the Act." 3. Briefly stated facts are that the AO during the course of assessment proceedings noticed that it has earned dividend income of ₹ 1,66,06,788/- and long term capital loss of ₹ 3,97,694/- which does not form part of taxable income but assessee has not attributed any expenditure towards this except ad hoc disallowance of ₹ 2,60,221/- offered u/s. 14A of the Act. Accordingly, he observed that "as is evident from the above submission, the assessee has not denied of incurring expenditure in relation to dividend income, which does not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which does not form part of the total income." Accordingly, he made disallowance of ₹ 49,85,653/- by applying the provisions of section 14A of the Act read with Rule 8D(2)(iii) of the I. T. Rules, 1962 as under: "The average of value of Investment = (Rs.97,86,43,112 + ₹ 101,56,18,232)/2 = ₹ 99,71,30,672/- Disallowance u/s. 8D(2)(iii) = 0.5% of ₹ 99,71,30,672/- = ₹ 49,85,653/- 4.5. as the assessee has already offered ₹ 2,60,221/- for disallowance u/s. 14A, the differential amount of ₹ 47,25,432/- (i.e. ₹ 49,85,653 - ₹ 2,60,221) is now disallowed u/s. 14A and added back in computing the income under normal provisions of the Act. Since the assessee did not add back the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed firstly to modify/recalculate the disallowance of expenditure made uls. 14A of the Act after reducing the direct expenditure of consultancy fees of ₹ 46,10,000/- from the total expenses claimed by the appellant in the P &L A/C and thereafter restrict the disallowance of expenditure maximum to the extent of balance of expenses claim in the P&L A/C by the appellant. Thus, this ground of appeal is partly allowed." Aggrieved, now revenue is in appeal before us. 5. We have heard rival submissions and gone through facts and circumstances of the case. The facts are not in dispute that during the relevant year, the assessee earned divided of ₹ 1,66,06,788/- and long term capital loss of (Rs. 3,97,694/-) which do not form pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 46,10,000/- as Consultant Fees. Therefore, we are of the view that while applying Rule 8D(2)(ii), the AO should have excluded those expenses which were directly attributable to consultancy business income earned by the assessee. We find from records that the assessee filed the details of consultancy income and expenses incurred for the same before AO during the course of assessment proceeding but he has not considered the same. We further find that the dividend income amounting to ₹ 1,66,06,788/- was received by the assessee only from eight companies and dividend cheques were received though post or were directly credited to the assessee' bank account through ECS. As such no major expenses were incurred by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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