TaxTMI 
TaxTMI 
2017 (11) TMI 900
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..... 4.That the Learned Commissioner of Income Tax (Appeal) has erred in fact & in law while confirming disallowance of Rs. 22,000/- paid as fee for arbitration to Justice R. L. Khurana, for non-deduction of TDS; where the said fee is not covered in the definition of professional fee. 5.That the Learned Commissioner of Income Tax (Appeal) has erred in fact & in law while confirming disallowance of Rs. 2,20,924/- towards personal use out of / Travelling Expense (Rs. 53,181/-), Telephone Expenses (Rs. 67743/-) & Business. Promotion (Rs. 1,00,000/-) 6. That the Learned Commissioner of Income Tax (Appeal) has erred in fact & in law while disallowing the claim of the assessee in respect of carry forward of loss of Rs. 4,11,895/-, and instead treating it as Long Term Capital Gain of Rs. 23,83,252/- and including the same in the taxable income of the assessee. 3. As regards Ground No. 1, the brief facts of the case are that the ld. CIT(A), after careful consideration of the assessment order and submissions thereof, observed that the assessee received dividend income of Rs. 71,89,451/- which has been claimed as exempt u/s 10(34) of the Income-tax Act, 1961 [hereinafter referred to ....
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....allowance of expenditure in relation to dividend income is thus not admissible in computing the income of an assessee whether the shares are held as investment or they are held on trading account as stock-in-trade. The provisions of section 14A, controls the computation of income under the provisions of the Act and has overriding effect over other provisions. Therefore, even if the expenditure is allowable under any other provision of the Act, disallowance is made because of the overriding effect of section 14A of the Act. 5. We further observe that the Legislature, by using the expression "expenditure in relation to income which does not form part of the total income" in section 14A of the Act, in no way indicates that it does not encompass disallowance of expenditure incurred in relation to the income in the absence of actual receipt of income during the relevant previous year. On the contrary, the term "in relation to" is wide enough to include in its sweep expenditure both "for making or earning income" and "incurred wholly and exclusively for the purposes of business carried on by the assessee". When there is no income, it cannot form part of anything and certainly it does no....
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....ome by way of dividend does not form part of the total income by virtue of the provisions of Section 10(33). Income from mutual funds stands on the same basis; iii) The provisions of sub section (2) and (3) of Section 14A of the Income Tax Act 1961 are constitutionally valid; iv) The provisions of Rule 8D of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008 are not ultra vires the provisions of Section 14A, more particularly sub section (2) and do not offend Article 14 of the Constitution; v) The provisions of Rule 8D of the Income Tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment Year 2008- 09;" 7. In ACIT v Citicorp Finance (India) Limited [300 ITR 398(AT Mum)] it was held that the provisions of sub sections (2) & (3) are procedural in nature and therefore section 14A will apply to all pending matters. The Hon'ble Calcutta High Court in Dhanuka & Sons vs. CIT 12 Taxmann.com 227 (Cal.) held that: "In our opinion, the mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by product....
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....g Officer was confirmed by the ld. CIT(A). 12. We have heard the rival contentions and perused the facts of the case. As a matter of fact, it was pleaded before the ld. CIT(A) as well as before us that the party is demanding money and copy of demand letter has been placed on record. But the ld. CIT(A) has not commented upon such demand letter and has not made any enquiry in this regard. In the interest of justice, the matter is set aside to the file of the ld. CIT(A) who will conduct proper enquiry and find out whether the creditors are still outstanding and genuineness of the demand letter so placed on record. Accordingly, Ground No. 3 is allowed for statistical purposes. 13. As regards Ground No.4 of the assessee, we find that the Assessing Officer disallowed non deduction of TDS on fees paid to arbitrators which was confirmed by the ld. CIT(A). 14. We have heard the rival contentions and perused the facts of the case. We find that the ld. counsel for the assessee has made the following submissions before the ld. CIT(A) : "In respect of payment made to Sh. Justice R.L. Khurana, Arbitrator, the same does not fall in the category of professional fee and as such no TDS is applic....