TaxTMI 
TaxTMI 
2017 (7) TMI 427
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....(iii) of the Act. 3. The facts of the case are that the assessee had admitted dividend income which was exempt from tax. Therefore, the AO disallowed u/s.14A by applying Rule 8D as follows:- Rs. Rule 8D(2)(ii) 3,21,927/- Rule 8D(2)(iii) 12,22,441/- 15,44,368/- On appeal the Ld.CIT(A) remitted the issue relating to Rule 8D(2)(ii)for fresh consideration. However, he confirmed the addition in respect of disallowance made under Rule 8D(2)(iii). Against this, the assessee is in appeal before us. 4. The ld.A.R submitted that in assessment year under consideration assessee has not made any investment yielding exempted income in the assessment year and also not incurred any expenditure to earn exempted income. According to ....
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.... part of total income. No notional expenditure can be apportioned for the purpose of earning exempt income unless there is an actual expenditure in relation to earning the income not forming part of total income. If the expenditure is incurred with a view to earn taxable income and there is apparent dominant and immediate connection between the expenditure incurred and taxable income, then no disallowance can be made under section 1 4A merely because some tax exempt income is received by the assessee. 5.2 Averting to the facts of the case in hand, the assessee had made a claim that no expenditure has been incurred or claimed for earning the exempt income. From the details of the expenditure, it is clear that the expenditure incurred and ....
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.... not disallowed any expenditure of personal nature out of the income from business or profession in the computation of income in the assessment order. In view of this we are of the opinion that the expenditure claimed in the business of share dealings cannot be correlated to the incomes earned in personal capacity that too on dividend, PPF interest and tax free interest on RBI bonds. In view of this, we are of the opinion that estimation of expenditure of '20,000/- out of business expenditure claimed in business activity cannot be considered for being incurred for this earning of tax free income of above nature. In view of this disallowance so made under section 14A of '20,000/- is deleted. Not only that the CIT(A) directed the A.O. to cons....