2015 (8) TMI 598

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....erred to as "AO") of Rs. 1,048,922/- u/s 14A read with Rule 8D. Ground No. 2: The CIT(A) has erred on facts and circumstances of the case in confirming the addition made by the AO of Rs. 1,048,922/- u/s 14A read with Rule 8D without appreciating the fact that the Ld. AO proceeded to apply Rule 8D without giving due regard to the suo moto disallowance and nature of expenses incurred, by the appellant Ground No. 3: The CIT(A) has erred on facts and circumstances of the case in confirming the AO's action of considering the interest income of Rs. 60,141,004/- taxable under the head "Income from Other Sources" instead of head "Profits and Gains of Business or Profession" as correctly offered by the assessee. Ground No.4: Th....

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....n the mutual funds comprising certain growth funds on which no dividend income is earned. The AO excluded the investment so far it is growth fund. He has further contended that during the year the assessee has made the investment only in 10 funds out of which certain funds do not yield dividend income and therefore, the same are excluded for the purpose of disallowance under section 14A. The investment is made only in mutual funds which do not require any expenditure to be incurred by the assessee. He has further contended that the assessee has worked out the disallowance by allocating the salary of one designated officer/employee in this respect. The ld. AR has further submitted that for the assessment year2008-09 the AO worked out the dis....

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....o other expenditure has been incurred by the assessee for earning the dividend income, however, the AO has not proceeded to examine the claim of the assessee about the allocable expenditure in respect of the exempt income. Once the assessee has claimed that it has not incurred any expenditure other than allocated by itself for the purpose of disallowance u/s. 14A the AO has to examine the claim of the assessee and to find out which are the expenditure claimed by the assessee in the P&L Account allocable for the purpose of disallowance u/s. 14A in respect of earning exempt income. The expenditure incurred in relation to income which does not form part of the total income has to be disallowed u/s. 14A. Only when such expenditure has a direct ....

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....gorical statement that the facts and circumstances of assessment year 2008-09 and 210-11 are identical, therefore, ground of appeal No.1 has been stated to be a covered matter. Having regard to the facts and circumstances of the case and in law, I am of the considered opinion that the disallowance of expenses has been correctly computed by the AO u/s. 14a of the Act r.w.r. 8D of I.T. Rules, and therefore, the said net disallowance of Rs. 10,48,922/- is confirmed. As a corollary, ground of appeal No.1 is dismissed." 4.1 Once the facts and circumstances for the assessment year 2008-09 and assessment year under consideration are identical then the basis of disallowance can not be different. Accordingly we direct the AO to restrict the disal....