2015 (10) TMI 2757

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..... om business, and further erred in not allowing the claim of depreciation of Rs. 11,68,023/-. 2.01. The ld. CIT(A) has erred in holding that the director has used the property of the appellant as a tenant and not as a director of the company." 2. Apropos Ground No.1, the AO made disallowance of Rs. 42,67,498/- u/s 14A of the Income-tax Act, 1961 under Rule 8D(2)(ii) & Rule 80D(2)(iii) of the I.T. Rules, 1962. The ld. CIT(A) deleted the disallowance of Rs. 17,30,834/- made under Rule 8D(2)(ii), holding that there was no direct or indirect expenditure incurred in earning tax free income. 3. However, apropos disallowance of administrative expenditure under Rule 8D(2)(iii) of the I.T. Rules, the ld. CIT(A) maintained the disallowance, hol .....

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..... is of Rs. 31,13,082/-; that out of total of incomes of the assessee amounting to Rs. 80,189,889/-, only an amount of Rs. 9,04,668/- is dividend income; that thus, out of total expenses claimed Rs. 31,13,082/-, Rs. 25,36,664/- has been disallowed as in relation to dividend; that considering the enormous other income, this quantum of disallowance is grossly absurd and unreasonable. It has been contended that under section 14A(2) of the Act, resorting to Rule 8D of the Rules, arises only if the AO is not satisfied with the correctness of the claim of the assessee in respect of expenditure relating to income, which does not form part of the total income under the I.T.Act, having regard to the accounts of the assessee. It has been contended that .....

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..... e comes to about Rs. 99,55,235/-. That being so, the amount effectively claimed as expenditure is of Rs. 31,13,038/-. As per the profit & loss account (APB-4), the total income is amounting to Rs. 80,189,899/-. Of this, dividend income is of Rs. 9,04,668/- only. Therefore, out of the total expenses claimed of Rs. 31,13,082/-, the amount disallowed in relation to dividend is of Rs. 25,36,669/-. Now, this is evidently absurd on the face of it and the assessee is correct in contending that since there is huge other income, the quantum of disallowance is entirely unreasonable. Rather, a reasonable disallowance can be made, if the accounts of the assessee are considered, without taking recourse to Rule 8D of the Rules. The ld. counsel for the as .....

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