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TMI Blog2021 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... car was used for personal purpose. Therefore, we are of the considered view that the AO was erred in making ad hoc disallowance of depreciation on car and hence, we direct the AO to delete addition made towards ad hoc disallowance of depreciation on car. Disallowance u/s 14A - AO has determined disallowance of ₹ 2,19,054/- u/s. 14A by invoking Rule 8D of the IT Rules, as against total exempt income being dividend income earned for the year at ₹ 1,990/- - HELD THAT:- It is a well settled principle of law that disallowance contemplated u/s. 14A of the Act, cannot exceed exempt income earned for the year. In this case, although the assessee has earned exempt income of ₹ 1,990/-, the AO has determined disallowance of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for business the asset falls under the block of asset concept and it becomes business asset which could not be segregated for personal use and business use and disallowing 25% on depreciation for personal use is untenable in law. 3. The Learned Assessing Officer and Commissioner of Income Tax, Appeals were wrong in invoking the provisions of Rule 8D read with Section 14A while that provisions are not applicable to the case and facts of the case of appellant. 4. The Learned Commissioner of Income Tax Appeals erred in not considering the fact that the expenditure in earning the exempted income had not incurred any expenditure which had any nexus with the exempted income. 5. The appellant craves leave to file and furnish in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring total income of ₹ 3,11,64,900/-. The assessment was completed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') on 17.03.2016 by determining total income at ₹ 3,13,83,954/- by making addition towards 25% disallowance of depreciation on car, on the ground that use of car for personal purpose cannot be ruled out. Similarly, the AO has made addition towards disallowance of expenses u/s. 14A r.w.r. 8D of Income Tax Rules, 1962 for ₹ 2,19,054/-. The assessee carried the matter in appeal before the first appellate authority. The ld. CIT(A) for the reasons recorded in his appellate order has partly allowed the appeal filed by the assessee, where he had confirmed addition made towards disallowance of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next issue that came up for our consideration is disallowance of expenses u/s. 14A of the Act. The AO has determined disallowance of ₹ 2,19,054/- u/s. 14A by invoking Rule 8D of the IT Rules, as against total exempt income being dividend income earned for the year at ₹ 1,990/-. It is a well settled principle of law that disallowance contemplated u/s. 14A of the Act, cannot exceed exempt income earned for the year. In this case, although the assessee has earned exempt income of ₹ 1,990/-, the AO has determined disallowance of ₹ 2,19,054/- which is over and above exempt income earned for the year, contrary to the legal position. The ld. CIT(A) after considering relevant facts has rightly restricted disallowance to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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