2014 (3) TMI 426

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....ated, the relevant material facts are like this. During the course of the assessment proceedings, the AO noted that the assessee has earned dividend income of Rs.21,63,508/- but has not claimed any expenditure against that exempted income. The AO was of the view that in view of the provision of section 14A(3), the provision of section 14A(2) shall also apply in a case in which the assessee has claimed that no expenditure is being incurred by him in relation to the exempted income. It was in this background that the AO invoked Rule 8D and calculated disallowance of Rs.45,04,471/- under section 14A read with rule 8D. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied ....

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....f 'Income Tax Chandigarh II vs. M/s Winsome Textile Industries Limited, Chandigarh), decided on 25.8.2009, wherein it was observed as under:          "6. Contention raised on behalf of the revenue is that even if the assessee had made investment in shares out of its own funds, the assessee had taken loans on which interest was paid and all the money available with the assessee was in common kitty, as held by this Court in CIT v. Abhishek Industries Limited. (2006) 286 ITR 1 and therefore, disallowance under section 14A was justified. 7. We do not find any merit in this submission. Judgment of this Court in Abhishek Industries (supra) was on the issue of allowability of interest paid on loans given t....

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....he ld. D.R. does not object to the prayer for restoration of the matter to the file of the AO but submits that once rule 8D is in place, it is not necessary as to whether or not expenses have been actually incurred or not for earning the tax exempt income. The assumption of exemption having been incurred, according to ld. D.R., is implicit in the scheme of section 14A read with rule 8D. We are thus urged to confirm the action of the authorities below and decline to interfere in the matter. 6. Having heard the rival contentions and having perused the materials available on record, we are of the considered view that as held by the Coordinate Benches of this Tribunal, the burden is on the AO to establish the nexus of expenses having incurred ....