2014 (1) TMI 1350

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....ssessee is with regard to the disallowance made by the Assessing Officer of Rs.15,60,967/- invoking Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short "the Rules"). 3. In brief, the facts are that assessee is an individual, who filed his return of income for assessment year 2009-10 declaring total income of Rs.97,08,110/-, which inter-alia included income from the business and income from other sources. The Assessing Officer noted that assessee had made investments in Bonds/Deposits/Mutual Funds/Shares, which yield dividend/interest income was exempt from tax. Therefore, he invoked the provisions of Section 14A of the Act to disallow expenditure incurred in relation to the income which was exempt from tax and ....

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....arded by the CIT(A). The learned counsel further pointed out that if at all any addition under Section 14A of the Act read with Rule 8D of the Rules is to be sustained, there was no justification for the disallowance of Rs.13,05,631/- made in terms of Rule 8D(2)(ii) of the Rules inasmuch as there was no interest expenditure which could not be directly attributable to any particular income, whereas the case of the assessee was that the entire interest expenditure of Rs.21,40,954/- was related to earning of income other than the exempt income. On this aspect, the learned counsel submitted that before the Assessing Officer as well as the CIT(A) assessee had pointed out that there were sufficient interest-free funds available with the assessee ....

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....d declared both taxable as well as exempt income. It is further noted by the Assessing Officer that in the written submission dated 09.12.2011, assessee agreed that he was hit by the provisions of Section 14A of the Act. Accordingly, the Assessing Officer worked out the disallowance under Section 14A of the Act read with Rule 8D of the Rules amounting to Rs.15,60,967/-, as detailed in para 5 of the assessment order. On this basis, the stand of the Revenue is that the assessee agreed to the addition as made by the Assessing Officer. 8. The assessee contested the aforesaid before the CIT(A) by pointing out that there was no such agreement and in support of the said proposition, the learned counsel has referred to a communication dated 13.01.....

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....assertion that the entire interest expenditure was attributable to business income and therefore it could not be considered for disallowance in terms of Rule 8D(2)(ii) of the Rules, in our view, is devoid of any factual support. In-fact, the CIT(A) has rejected the said plea on the ground that the same was "not backed by any evidence or material on record". Ostensibly, the said position continues even before us inasmuch as there is no material to say that the entire interest expenditure in question of Rs.21,40,954/- was attributable to the earning of business income alone. 11. In-fact, the other plea of the assessee that he was having sufficient interest-free funds to cover the investments in question, is also not borne out of record. In t....