2019 (7) TMI 236

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....dition of Rs. 3,06,737/- which was added by the AO under section 14A of the Income Tax Act 14A r.w. Rule 8D of the Income Tax Rules. 3. Brief facts of the case are that the assessee is an AOP engaged in the business of manufacturing of soft drink and fruit grain drink mix etc. under the brand name "Rasna". It has filed its return of income on 29.9.2013 declaring total income at Rs. 3,19,10,958/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, according to the AO, the assessee has shown dividend income of Rs. 2,46,246/- which was claimed as exempt. The ld.AO thereafter invited explanation of the assessee to show the expense....

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.... made by the assessee during the. year under consideration itself. The volume of the above investment also indicate that certain administrative expenses must have been involved therein. In light of these facts, the reply of the assessee cannot be accepted. Disallowance of expenses attributable to exempt income has been considered in view of followingcase laws: (i) Dhanuka Sons vs. C1T339ITR 0319 Calcutta (2011), wherein the Hon'ble High Court held that disallowance of in expenditure in relating to exempt income u/s 10(34) is justified u/s 14A. (ii) CIT vs. Smt Leena Ramchandran 339 ITR 0296 (2011), wherein Hon'ble Kerala High Court held that expenditure in relation to income not forming part of total incom....

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.... assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has scaled down this disallowance to Rs. 3,06,737/- on the ground that 0.5% of average investment with regard to administrative expenses is required to be made. The ld.counsel for the assessee while impugning the order of the ld.revenue authorities took us through bifurcation of alleged dividend of mutual fund which reads as under: Dividend on Mutual Fund: 1. Dividend on SBI SDFS: 2,03,248 2. Dividend on SBI Short Horizon 24,011   Fund Ultra Short Term Fund:   3. Dividend on Tata Flater Fund Daily Div. 8,629 4. Dividend on Reliance Money 10,358   Manager Fund-Daily Div.     Total ....