2015 (10) TMI 1623

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of Rs. 3,10,10,076/-, which is exempt under section 10 of the Act. The AO observed that the assessee is in receipt of considerable amount of exempt income, and no separate accounts have been maintained with regard to the earning of exempt income. The AO observed that the management and maintenance of such investments always entail certain administrative expenditure, such as, telephone expenditure etc. Therefore, he disallowed the proportionate amount of expenditure incurred out of the total expenditure incurred by the assessee during the year, by taking the proportion of dividend income to total exempt income and worked out the same at Rs. 5,01,024/-. 4. On appeal, the CIT(A) observed that it was hard to accept the submissions of authoriz....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....or much less, the disallowance as per rule 8D of the IT Rules. He submitted that the dividend is received from Nirma Ltd. of Rs. 3,10,10,076/- which is directly credited in the bank account of the assessee through ECS. This shows that there is no expenditure incurred for earning dividend income. He relied on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Torrent Power Ltd., (2014) 363 ITR 474 (Guj) and submitted that the Hon'ble jurisdictional High Court has held that where there is nothing on record to indicate that there has been in fact any actual expenditure incurred by the assessee for earning tax free income, and that being question of fact, no disallowance of expenditure artificially or on the basis of assumpti....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....,06,372/- being 0.5% of the average investment in shares on account of which the administrative charges incurred in relation to investment activities, which gave rise to exempt dividend of Rs. 3,10,10,076/-. The assessee aggrieved by this sustenance of disallowance of Rs. 1,06,372/- is in appeal before us. 9. The contention of the assessee is that no expenditure was incurred in relation to exempt income and no material has been brought on record to show that any actual expenditure was incurred in relation to earning of exempt income, and therefore, the disallowance of Rs. 1,06,372/- made on conjecture and surmises is untenable. The assessee placed reliance on the decision of Hon'ble Gujarat High Court in the case of Torrent Power Ltd. (sup....