2013 (7) TMI 1022

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....involved in this appeal is disallowance of expenditure under section 14A of the Income Tax Act, 1961. 2. Facts in brief:- The assessee is a non-banking finance company and is engaged mainly in the investment business. For the relevant year, the assessee has earned dividend income of Rs. 13,89,40,620, which was claimed as exempt under section 10(34) in the return of income. For the purpose of disallowance under section 14A, the assessee itself has disallowed a sum of Rs. 9,00,907, for the purpose of earning the exempt income. The assessee, in the audit report had given a working of disallowance under section 14A, which has been incorporated by the Assessing Officer at Page-2 of the assessment order. In sum and substance, the assessee subm....

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....at Rs. 24.11 lakhs, that is, the amount of expenditure which has been claimed in the Profit & Loss account. Thus, additional disallowance of Rs. 15.11 lakhs was made. 5. The learned Commissioner (Appeals), following the decision of Mumbai Bench of the Tribunal in Hoshanji D. Nanavati v/s ACIT, ITA no.3567/Mum./2007, order dated 18th March 2011, held that insofar as the depreciation is concerned, the same cannot be disallowed or can be held to be attributable to earning of exempt income. Thus, the amount of depreciation which is at Rs. 7.22 lakhs was to be excluded for the purpose of disallowance. Thus, out of additional disallowance of Rs. 15.11 lakhs made by the Assessing Officer, relief of Rs. 7.22 lakhs was given by the learned Commis....

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....nvestment business and has deployed huge fund of more than Rs. 441.47 crores (as noted by the Assessing Officer at Page-4 of the assessment order) and on deployment of such fund, it has earned dividend income of Rs. 13,89,40,620. For the purpose of disallowance, the assessee has disallowed sum of Rs. 9,00,907, which can be said to be attributable for earning of exempt income and, thereafter, has not claimed bad debt written-off at Rs. 8,00,000. In effect, the disallowance of Rs. 17,00,907, was claimed to be disallowed by the assessee, however, it has to be taken at Rs. 9,00,907, as the bad debt has not been claimed in the Profit & Loss account. It is not in dispute that the assessee has incurred expenditure relating to earning of the exempt....