TaxTMI 
TaxTMI 
2015 (10) TMI 21
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.... 16,00,583/- made by the A.O u/s14A, read with Rule 8D. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in holding the disallowance u/s14A, read with Rule 8D cannot be made in this case. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in holding that Rule 8D applied only in a case where the assessee has paid interest on investment. 4. The order of the CIT(A) is erroneous and is not tenable on facts and in law." 3. The assessee company is engaged in business of manufacture and sale of Spirit, IMFL, and Country Liquor. As per the return of income the assessee had made investments during the year and earned the income which does not form part of total income. T....
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....ich are relatable to the tax free income i.e., the investments of the assessee. In view of these reasons, the disallowance under Section 14A of the Income Tax Act calculated by AO as under:- 1 Amount of expenditure directly relating to the exempt income NIL 2 Interest Expenditure, which is not directly related to the exempt income 2,19,48,539 Calculated @ average rate of interest on average of investment @ Average Utilization 13,68,032 3 An amount equal to one-half percent of the average value of investments, income from which is tax free as appearing in the Balance Sheet on the first and last day of the previous year Investment at the beginning of the year i.e, 1/4/2007 3,95....
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....re was increase in the investment to the extent of Rs. 31,52,841/-. This increase in investment was stated to be made out of the funds available with the assessee, and, therefore, no component of interest on this amount was involved as per assessee. The assessee has contended that no expenses have incurred in earning the exempt income of Rs. 96,622/-. The same was recorded in CIT(A)'s order as well. The AO while disallowing this has not brought on record anything to establish that the assessee had incurred any expenses while earning this exempt income. Therefore, the action of the AO in disallowing the same of Rs. 16,00,583/- against the dividend income of Rs. 96,622/- u/s 14A read with Rule 8D is not just and proper as there is no expendit....
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.... The Assessing Officer has not given clear picture about the expenditure which has been incurred by the assessee and, therefore, the same has to be looked into by the AO. 9. While rejecting the claim of the assessee with regard to the expenditure or no expenditure in relation to exempt income, the AO must specify cogent reasons for the same and has to show why he is not satisfied with the correctness of the assessee's claim as held in case of Maxopp Investment Ltd. V. Commissioner of Income-tax, New Delhi [2011] 15 taxmann.Com 390 (Delhi HC). The Hon'ble Supreme Court in case of CIT vs. Walfort Share and Stock Brokers (P) Ltd. 326 ITR 1 (SC) wherein it was held that "For attracting Section 14A, there has to be proximate cause for disallo....