2016 (11) TMI 1418

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....  Income Tax Act, 1961 (hereinafter referred to as "the Act") by applying Rule 8D of the Income Tax Rules, 1962. 3. The facts apropos to the issue are that the assessee is an Industrial Pvt.Ltd. Company engaged in manufacturing, sales and exports of Dyes. During the course of assessment proceedings, the Assessing Officer (AO) observed that assessee-company has earned dividend income of Rs. 41,21,853/- which is claimed to be exempt under section 10(34) of the Act. It was noted by the AO that the assessee holds investment to the tune of Rs. 23,62,86,676/- as on 31/03/2009. The assessee has claimed interest of Rs. 24,691/-. In addition to this, some administrative/other expenses are attributable to earn the tax-free income by way of divi....

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....m investments since number of years. No staff is engaged and no expenses have been incurred for the administration of the investments. For this reason, section 14A of the Act has no application in the present facts of the case. The Ld.AR urged that the AO has indulged in making disallowance without pointing out a single instance of any direct or indirect expenditure incurred by the assessee for earning the dividend income which is exempt from Income Tax Act. There is no finding by the AO as to how much expenditure have been incurred by the assessee for earning the dividend income. Under the circumstances, the order of the CIT(A) requires to be set aside and disallowance made under section 14A requires to be cancelled. 7. The Ld.DR, on the ....

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.... on behalf of the assessee that no expenditure has been incurred in relation to income which does not form part of the total income. It is an common knowledge that holding of such investments would entail ordinary expenses like DEMAT charges and engagement of senior management. We also notice that there are several instances of change in the investment during the year qua the investments held in the previous year. Naturally, the Board and Senior Management has devoted time and attention in the decision making process. Therefore, the contention of the assessee about NIL administrative expenditure for holding the investment stands belied in the facts of the case. In the event, the Assessee claims that no expenditure has been incurred by him ....