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TMI Blog2017 (2) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2009-10 on the following grounds : 1. That on the facts and in the circumstances of the case, the lower authorities erred in law disallowing Depreciation Allowance of ₹ 4,28,653/- under rule 8D of the Income-tax Rules 1962 read with section 14A of the Income Tax Act ( Act ) without satisfying the nexus of Depreciation and dividend income earned. 2. That on the facts and in the circumstances of the case, the lower authorities erred in law in disallowing Depreciation allowance which does not have any direct and immediate connection with dividend income of ₹ 1,12,19,944/-. Depreciation allowance is not an expenditure incurred in relation to dividend exempt income. 3. That on the facts it is contended that Depreciation is allowed with reference to cost of the eligible assets and is not dependent upon earning of taxable or non-taxable income. 4. The lower authorities erred on facts and in law in concluding that Depreciation is an expenditure debited to P L account. It is contended that Depreciation is an allowance and an admissible deduction as per explanation 5 of section 32 to Act whether or not debited to P L account and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2,31,863/- stating that it was statutory expense which was necessary to run and maintain the company, but he did not give relief for depreciation disallowance of ₹ 4,28,653/-. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before the Tribunal. 4. The ld. AR of the assessee submitted that the company was engaged in the business of NBFC and he had made investments in various companies for controlling interest, but not for the purpose of earning exempt income. The Assessing Officer has also not recorded satisfaction note before disallowing all the expenditure incurred. He has further submitted that the depreciation is not an expenditure incurred. It is an allowance which is mandatory to be allowed as per section 32 and Explanation-5 thereto. Interpreting the expenditure incurred as mentioned in section 14A(1), it was submitted that there must be actual expenditure and further interpreting the word in relation to submitted that the word expenditure incurred should be read in conjunction with the word in relation to . It means that there should be actual expenditure in relation to the exempted income. He also placed reliance on the following jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be : [Provided also that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:] Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, in the ratio of the number of days for which the assets were used by them. Explanation 5.-For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income; We further reproduce the provisions of section 14A which reads as under : 14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed19, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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