2012 (12) TMI 124

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....rder. 2. First issue which is common in both the appeals relates to addition made under sec. 14A of the Act. The facts of the case stated in brief are that the assessee is a company engaged in chain of Chinese food restaurants. During the year under consideration the assessee received dividend of Rs.19,73,982/-. In response to a query, it was submitted by the assessee that dividend income has been earned by it from mutual funds the investment wherein was made out of fresh capital received during the year under consideration and also from zero coupon preference shares issued by the assessee company. According to the assessee, share capital obtained during the year under consideration was not immediately required for any business activi....

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....st payment made by the assessee was in connection with exclusive needs of the assessee and therefore, the same could not have been apportioned on the basis of average value of investment and average total value of assets. The learned CIT(A) therefore, held that disallowance on account of interest was not justified. However, as regards the disallowance of expenditure, he rejected the contention of the counsel of the assessee that no expenditure was at all incurred by the assessee in relation to earning dividend income of Rs.19,73,982/-. He therefore, estimated 10% of dividend income as disallowance amounting to Rs.1,97,398/-. 4. The assessee is aggrieved by affirming the addition of Rs.1,97,398/- and the Revenue is aggrieved against delet....

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....me. Since the Assessing Officer had not examined the issue relating to nexus between the expenditure incurred and exempt income earned, we set aside the matter to the file of the Assessing Officer with the directions to examine whether any administrative expenditure was incurred for earning the exempt income. The AO is directed to decide the issue afresh in the light of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra). Needless to say, the Assessing Officer will provide opportunity of being heard to the assessee. 6. The next issue for consideration in assessee's appeal relates to disallowance of Rs.5,00,000/- made by the AO on ad hoc basis. The AO during the course of assessment proceedings as....