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TMI Blog2017 (12) TMI 1794X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s.14A of the Income Tax Act, 1961 (in short ''the Act'') to the amount of dividend income claimed by the assessee as exempt. 3. Ld. Assessing Officer had considered application of Sec.14A r.w.r 8D as automatic. Assessee had earned dividend income of Rs. 2,76,61,437/- for assessment year 2008-09 and Rs. 5,52,99,194/- for assessment year 2009-2010. Ld. Assessing Officer by applying Sec.14A r.w.r.8D made a disallowance of Rs. 8,07,86,170/- for assessment year 2008-09 and Rs. 10,10,18,135/- for assessment year 2009-2010. 4. When the matter reached the ld. Commissioner of Income Tax (Appeals), ld. Commissioner of Income Tax (Appeals) relying on the judgment of Hon'ble Delhi High Court in the case of Joint Investments P. Ltd vs. CIT, 372 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , were not incurred for earning of exempt income. From the working of the disallowance by the Assessing Officer which is already reproduced earlier in our order, it would be evident that all those expenses have not been considered by the Assessing Officer. In Part (i), the Assessing Officer has considered Rs. 2,97,440 which the assessee himself has admitted as a direct expenditure incurred for earning the exempt income, viz., securities transaction tax, depository charges and custodian fees. In Part (ii), only the interest has been considered and in Part (iii) half per cent. of the average investment has been considered. Therefore, these expenses which the assessee claimed to have been not incurred for earning of exempt income have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer and the Commissioner of Income- tax (Appeals). It was urged that in the present case since Rs. 2,97,440 was volunteered as disallowance, the Assessing Officer was under a duty to first consider the merits of that claim and, thereafter, for valid grounds, if any, reject the contention before proceeding under section 14A(3) read with rule 8D(2). Learned counsel highlighted that the sum volunteered, i.e., Rs. 2,97,440 was in addition to ad hoc disallowance which was offered and accepted without scrutiny by the Assessing Officer. 6. Learned counsel for the Revenue contended that given the structure and phraseology of rule 8D, the interpretation of the Commissioner of Income- tax (Appeals) and the Income-tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2,97,440 as a disallowance under section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the Assessing Officer-an aspect which is completely unnoticed by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. The third and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000, the disallowance ultimately directed works out to nearly 110 per cent. of that sum, i.e., Rs. 52,56,197. By no stretc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is to be charged in respect of the income of a period other than the previous year, income tax shall be charged accordingly. Thus, where the statute indented that income shall be recognized for taxation in respect of any previous other than that immediately preceding the relevant assessment year, the provision shall expressly state so. The provisions of s.10 in Chapter III of the Act dealing with Incomes not included in total income commences with the phrase. In computing the total income of a previous year, any income falling within any of the following clauses shall not be included .....' 15. The exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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