9911796707
TMI Blog2017 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... formula under sub-rule (2) of Rule 8D. However, these statutory provisions do not require that such satisfaction must be arrived at in a particular manner. As long as there is sufficient material to enable the Assessing Officer to arrive at such a satisfaction and which is also recorded by him in the order of assessment, the requirements of the statute would be satisfied. In the present case, we have noted that the Assessing Officer has given detailed reasons for discarding the assessee’s theory that to earn the assessable income the assessee incurred no expenditure whatsoever. The Tribunal confirmed such view. Decision of the Assessing Officer to apply the formula under Rule 8D was therefore correct. - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 14A of the Income Tax Act, 1961 read with Rule 8D(ii) of the Income Tax Rules. 3. For the assessment year 2009-10, the assessee had filed the return of income in which the assessee had shown dividend income of ₹ 41.20 lakhs (rounded off) and long term capital gain of ₹ 1.28 crores (rounded off) as income exempt from tax. To earn such income, the assessee had made investment of ₹ 23.62 crores (rounded off) as on 31.03.2009. The assessee had showed Nil expenditure for earning such tax exempt income. The Assessing Officer was not convinced about this claim of the assessee and therefore issued a show cause notice to the assessee why disallowance under Section 14A of the Act read with Rule 8D of the Rules should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds on the date of investment. On these grounds, the Assessing Officer rejected the assessee's explanation and proceeded to compute the expenditure to be disallowed in terms of Rule 8D of the Rules. 5. The matter was carried in appeal. The Commissioner (Appeals) confirmed the view of the Assessing Officer upon which the assessee approached the Tribunal. The Tribunal by the impugned judgement rejected the appeal making following observations: "8. We have carefully considered the rival submissions and gone through the orders of the authorities below. The solitary issue for adjudication is correctness of the disallowance under section 14A of the Act. We note that the assessee holds substantial investments which is pegged at ₹ 41.92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 14A of the Act. Besides, Rule 8D(2)(iii) of the IT Rules, 1962 has been enacted for such eventualities where it is not possible to allocate the indirect expenditure towards administration, etc. with any scientific accuracy. In the circumstances, we do not see any logic in the arguments of the assessee in so far as disallowance under Rule 8D(2) (iii) is concerned. However, in so far as disallowance of interest towards interest is concerned, we find that the averment made on behalf of the assessee that the own capital together with accumulated reserves are in excess of corresponding investment remains unrebutted. Therefore, in view of the long line of the judicial precedent on the issue, the disallowance towards proportionate interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred in relation to or in connection with the earning. Exempt income has a corollary. If no expenditure is incurred, no disallowance can be made. 7. With the observations made by the courts in the above noted judgements, there can be little quarrel. What Section 14A of the Act envisages is disallowance of expenditure incurred by an assessee in relation to income which does not form part of the total income. This flows from sub-section (1) of Section 14A. Sub-section (2) of Section 14A permits the Assessing Officer to determine such amount of expenditure if he 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. Sub-section (3) of Section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
