2016 (7) TMI 1128

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....g with ITA No. 6205/Del/2014(AY 2010-11). 2. The grounds raised in ITA No. 6205/Del/2014 (AY 2010-11) read as under:- i) That the order passed by the Ld. CIT(A) is against the law, facts and circumstances of the case and must be quashed. ii) That the addition made of Rs. 73,902/- u/s. 14A read with Rule 8D of the Income Tax Rules is uncalled for, since the assessee has not claimed any expenditure against the investment income, except minor amount of Rs. 56/- and, therefore, the question of disallowance does not arise and be deleted. iii) That the assessee prays that she be allowed to add, amend or alter the grounds of appeal, at the time of hearing. 3. The grounds raised in ITA No. 6204/Del/2014 (AY 2010-11) read as under:- ....

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....e appeared from time to time and filed the requisite details which were examined with reference to the contents of the inputs available with the AO. The books of accounts were produced and the same were examined on test check basis by the AO. Thereafter, the AO made the various additions and completed the assessment at income of Rs. 16,40,250/- u/s. 147/143(1) of the I.T. Act vide his order dated 20.1.2014. 5. Against the aforesaid additions, assesssee made an appeal before the Ld. CIT(A) who vide impugned order dated 10.9.2014 has partly allowed the appeal of the Assessee, but affirmed the addition made by the AO u/s. 14A of the Income Tax Act, 1961. 6. Against the order of the Ld. CIT(A) assessee is in appeal before the Tribunal. ....

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....e quantum of the disallowance. there must be a proximate relationship between the expenditure and the income which does not form part of the total income. Once such a proximate relationship exists. the disallowance has to be effected. All expenditure incurred in the earning of income which does not form part of the total income has to be disallowed subject to compliance with the test adopted by the Supreme Court in Walfort and it would not be permissible to restrict the provisions of Section 14A by an artificial method of interpretation. ........ Hence, the intention of section 14A is clearly to disallow all expenses relating to the non taxable income, and to curb the practice of claiming allowances for expenditures on exe....

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....aid Act is the 'actual' expenditure in relation to or in connection with or pertaining to exempt income. The corollary to this is that if no expenditure is incurred in relation to the exempt income, no disallowance can be made under section 14A of the said Act. " 9.2 Now applying the aforesaid legal position to the facts of the assessee's case, it is noticed that the assessee has not claimed any expenditure against the investment income. The AO has made the addition on estimate basis which is not prescribed under the law. There is nothing on record to controvert the submissions made on behalf of the assessee. 9.3 In view of the aforesaid facts, I have no reason to disagree with the claim of the assessee that no further expendi....