TaxTMI 
TaxTMI 
2010 (11) TMI 617
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....ares, dividend income, interest on debentures and miscellaneous income etc. The Assessing Officer, during the course of assessment proceedings noted that the assessee company has received dividend income of Rs.1,01,21,075/- out of which it has claimed an amount of Rs.1,01,11,259 as exempt. On being questioned by the Assessing Officer as to why the administrative expenses should be allowed, the assessee submitted that the administrative expenses and the interest on borrowing are not being incurred by the assessee company in relation to income which does not form part of the total income. It was submitted that various expenses claimed by the assessee have been incurred in the normal course of business and are independent of any exempt income ....
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....ed in relation to earning of exempted dividend income. 2.2 However, the Assessing Officer was not convinced with the explanation given by the assessee. He noted that the funds were borrowed during the course of carrying on the business of the assessee and interest has been paid on those funds which are utilized for investment in business. Since investment in shares results into dividend income, the interest paid on borrowings is held to be having been incurred in respect of earning of exempt income. He, accordingly disallowed the entire amount of Rs.69.71 lakhs as has been incurred wholly and exclusively for the purpose of earning the income which has been claimed as exempt. 2.3 In appeal, the CIT(A) upheld the action of the....
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....n confirming allocation of expenses amounting to Rs.1.00 lakh and also confirming interest expenses to the extent of Rs.. 6.98 lakhs out of Rs.69.71 lakhs treated by the Assessing Officer as incurred in relation to earning of dividend income and thereby restricting the exemption u/s 10(33) to that extent. (b) The ld CIT(A) erred in confirming the action of the Assessing Officer in reducing the exempted dividend income to the extent of allocation of interest and expenses amounting to Rs.6.98 lakhs and Rs.1 lakh respectively while working out book profit u/s 115JA. 3. It is therefore prayed that the order of the CIT(A) be modified and direction be issued to allow the appeal n the ground raised before him." 4. The ld co....
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....on the paper book, he submitted that the Tribunal under identical circumstances has deleted the administrative expenses disallowed u/s 14A of the I T Act. As regards to the disallowance of interest expenditure, the ld counsel for the assessee drew the attention of the Bench to the order of the Tribunal for the Assessment Year 2000- 01 and submitted that the Tribunal in the said order while upholding the ad-hoc disallowance of Rs.1 lakh on account of administrative expenses has deleted the part of interest sustained by the CIT(A). He submitted that in the said order, the Assessing Officer had disallowed the entire interest expenditure of Rs.46.07 lakhs which, the CIT(A) had restricted to 9.94 lakhs. 4.4 The ld DR, on the other hand s....
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....sessee's own case for Assessment Year 2001-01 and the Tribunal while deciding the ground raised by the assessee has observed as under: "We have considered the rival submissions made by both the sides perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. From the details submitted by the ld counsel for the assessee in the paper book we find the investment in shares of Reliance Industries Ltd., Reliance Capital Ltd., TISCO, and units of UTI 1964 on which dividend has been received by the assessee company and claimed to be exempt have been made prior to the date of loans obtained by the assessee company. Therefore, we find merit in the submission of the ld counsel for the assesse....