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TMI Blog2025 (1) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... linked to the running of book shop and there is no indication that the expenditures include the expenses incurred for earning the exempt income. Therefore, the provisions of section 14A(2) is not applicable. The presumption u/s 14A(3) can be brought in the cases of a company which is an artificial person which are run by the actual persons representing the artificial person. There are implied expenditures which are incurred for both kinds of income i.e. regular as well as exempt income. In the case of individuals, they are not claiming any expenditure for conducting investment activities which are purely personal time and experience. Therefore, presumption u/s 14A (3) cannot be invoked in the case wherein the assessee is not claiming any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other relates to disallowance u/s 14A. 4. Before us, the assessee is in appeal raising grounds of appeal only against the disallowance made u/s 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 (for short the Rules ). 5. During assessment proceedings, the Assessing Officer observed that the assessee has an exempt income of Rs. 1,50,72,539/- and as per the Balance Sheet, there are huge investment of Rs. 6,32,22,222/- in shares mutual funds and investment in partnership firm. He observed that huge expenses have been claimed in Profit Loss Account of her proprietary concern, M/s. Imperial Book Depot. With the above observation, Assessing Officer proceeded to make the addition u/s 14A by relying on the CBDT Clarificatory Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not claimed any other expenditure which gives an impression that the relevant expenditure relating to investment activities. As per the provisions of section 14A (2), the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act wherein assessee has submitted the books of account before the Assessing Officer and Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to income which does not form part of the total income under this Act. From the above provision, it is clear that when the assessee declares income which consists of exempt income and claims the expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. regular as well as exempt income. In the case of individuals, they are not claiming any expenditure for conducting investment activities which are purely personal time and experience. Therefore, presumption u/s 14A (3) cannot be invoked in the case wherein the assessee is not claiming any of the expenditure which are directly or indirectly linked to the investment activities. Therefore, from the records submitted before us, we observed that assessee has not claimed any expenditure relating to exempt income and the provisions of section 14A(2) are not applicable in the present case. Accordingly, the grounds taken by the assessee are allowed. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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