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TMI Blog2018 (1) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. There has been no basis for the disallowance by the AO or CIT(A). Disallowance of 5% of the repair expenses would be just and fair. Accordingly ground no.4 is partly allowed. Receipt of surrender value of Keyman Insurance Policy as Central Income when the premium when paid was allowed as deduction from the composite income of the assessee at the time of payment - Held that:- The only business of the assessee is growing and manufacturing of tea. The surrender value of keyman insurance policy is admittedly connected with the business of growing and manufacture by the assessee and therefore it has to be considered as part of the composite income on which Rule 8 should be applied. In this regard it is also noticed by me that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e , the disallowance cannot exceed the exempt income earned. 4. The facts as far as ground nos. 2 and 3 are that the assessee which is in the business of growing and manufacturing of tea earned exempt income of ₹ 53,968/- during the relevant previous year. The AO applying the provision of Rule 8D made disallowance of expenses incurred in earning exempt income of ₹ 7,52,558/- in the following manner :- I. Direct Expense relating to exempt income = nil II. A= Interest debited to P L A/c. = 16014991 B= the average of value of investment = 7087901 C= the average of total as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant- Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T(A) erred in confirming the action of the AO in disallowing ₹ 23,52,246/- being 10% of repairing expenses on estimate basis when the expense were fully vouched and verifiable , were reasonable and fully incurred for business purposes and evidence whereof was produced before the AO. 8. The AO disallowed 10% of the repairs and maintenance claimed by the assessee as deduction in computing the total income on the ground that the assessee could not produce the related bills and vouchers. The CIT(A) confirmed the order of the AO. Before me the prayer of the ld. Counsel for the assessee was that the disallowance is excessive and should commensurate with the quantum of total expenditure and the scale of business of the assessee. I fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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