2014 (1) TMI 1622

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..... The solitary issue raised by the assessee relates to disallowance of expenses by invoking the provisions of section 14A read with rule 8D(2) of the Income-tax Act. 3. Rival contentions have been heard and record perused. The facts in brief are that the assessee derived exempt income from dividend long-term capital gains on equity shares and equity oriented funds. During the course of scrutiny assessment, the Assessing Officer rejected the disallowance worked out by the assessee and the Assessing Officer himself worked out disallowance at Rs. 10,40,025 by applying rule 8D read with section 14A of the Income-tax Act, 1961. The Assessing Officer observed that management expenses were incurred in relation to exempt income, accordingly he p....

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....tion of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-section (3) is nothing but an off shoot of sub-section (2) of section 14A. . . While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be....

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....and trading of marble and granite slabs and tiles. The investment in shares and mutual funds resulted into exempt income of Rs. 4,55,83,040. All the expenses, except security transaction tax, were related to its manufacturing and trading activities and they have no relation with the exempt income earned during the year. We have analysed the expenses so incurred by the assessee with respect to the exempt income earned and found that expenses incurred at Abu Road, where the manufacturing facilities of the assessee were located, were directly related to marble and granite manufacturing activities of the assessee. However no investment activities were carried out therefrom. As these expenses were not at all related to investment activities of t....