2022 (12) TMI 293

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....e u/s 14A of the Act sum of Rs 2,68,168/- out of interest allocated on surmises and conjectures by treating even Public provident fund deposits as investments for earning tax exempt income. " An alternate ground No. 2 has also been taken which reads as under:- "2. The Ld. CIT(Appeals) has erred in not deleting the disallowance of Rs. 2,68,168/- out of interest under rule 8D(iii) r.w.s. 14A ignoring that the assessee has capital and interest free fund far in excess of investments." 3. Briefly stated the facts are that the assessee individual is engaged in the wholesale and retail trading of machinery and hardware parts etc.. For A.Y 2013-14 the assessee e-filed his return declaring income of Rs. 11,03,960/- on 16.10.2013. His case was ....

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....ted the assessment on total income of Rs. 38,34,550/- under section 143(3) of the Act on 31.03.2016. 5. The assessee appealed before the Ld. CIT(A) who deleted the addition of Rs. 24,62,422/- on account of interest disallowed under section 36(i)(iii) of the Act. Regarding disallowance under section 14A of the Act r.w. rule 8D of the Rules, the Ld. CIT(A) gave following direction to the Ld. AO:- "In view of the principle enunciated by the Apex court in the case of Maxopp as detailed above, it is clear that expenditure attributable only to exempt income is to be considered for calculating the disallowance u/s 14A. A similar principle was enunciated by the jurisdictional High Court in the case of M/s ACB India Ltd. vs ACIT (ITA No 615/2014 ....

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.... cannot earn dividend without management of the investment. Para 4.5 of AO's order refers. There are numerous precedents which support the view that even if the assessee claims that he has not incurred any expenditure in earning dividend income, the provisions of section 14A of the Act r.w. Rule 8D of the Rules would still apply, if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee. Both the Ld. AO as also the Ld. CIT(A), having regard to the accounts of the assessee reached the conclusion that the claim of the assessee that he did not incur any expenditure in relation to income which does not form part of the total income is not sustainable in the eye of l....