2013 (7) TMI 686

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....our adjudication is disallowance of following expenditures made under section 14A r/w rule 8D. i) Rs. 37,885, attributable to indirect interest; ii) Rs. 4,48,753, worked out on the basis of ½% of the average investment; iii) Rs. 1,15,464 being 25% of the dividend income earned by the minor. 3. Facts in brief:- On a perusal of the balance sheet, the Assessing Officer observed that the total investment in shares and other financial institutions, income from which do not form part of the total income as on 1st April 2007, was at Rs. 17,28,74,558 and similar investment as on 31st March 2008 was at Rs. 17,52,72,590. He further noted that the assessee has debited interest expenditure of Rs. 73,092, in the Profit & Loss account. The ass....

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....by the assessee that the daughter of the assessee has also earned dividend income of Rs. 4,61,857 and, accordingly, 25% of the dividend income was taken as expenditure for earning of the exempt income and, hence, Rs. 1,15,464, was also disallowed under section 14A. Thus, the total disallowance worked out by the Assessing Officer aggregated at Rs. 6,02,102. 5. The learned Commissioner (Appeals) too confirmed the disallowance made by the Assessing Officer on the ground that the assessee has failed to prove that no interest bearing funds were used to purchase the shares as the interest bearing funds and non-interest bearing funds were mixed up and, therefore, interest expenditure incurred in earning of exempt income cannot be correctly determ....

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.... a direct nexus between the interest free loans and the investment made in shares, which has not been proved either before the Assessing Officer or before the learned Commissioner (Appeals). Thus, the disallowance on account of ½% of the average is fully justified. 8. We have heard the rival contentions and perused the findings of the Assessing Officer and the learned Commissioner (Appeals) as well as the material placed on record. Insofar as the disallowance of indirect interest expenditure of Rs. 37,885 is concerned, we agree with the contentions of the learned Counsel that the same cannot be disallowed in the assessee's case, firstly, the assessee has not claimed any interest in the Profit & Loss account and, secondly, the same h....