TaxTMI 
TaxTMI 
2025 (8) TMI 1748
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....s, like dividends, interest, management fees, etc. These incomes were offered to tax under the head 'Business Income'. The Ld.AO also assessed the total income under the head Profits and Gains from Business, being the head under which it was offered to tax in the Return of income. The assessee had also submitted that they are into the business of holding shares to have a controlling interest in the group companies, financing activity by way of granting inter-corporate deposits ('ICD') and providing management services. These businesses were indivisible and no expenses were directly attributable to any head of income as per the synopsis filed before this Tribunal on February 8, 2021. 2.2 Ld.AR thus submitted that by not adjudicating ground No. 2 there is mistake that has crept in. He submitted that the issue contested by the assessee in ground No.2 is to be adjudicated in the background of the facts as narrated hereinabove. 2.3 Ld. DR on the contrary relied on the orders passed by the authorities below as well as the view taken by the this Tribunal in para 6.4.2. He placed specific references on para 34 and 35 of decision of Hon'ble Supreme Court in the case of....
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....lated expenditure is outside the ambit of the applicability of section 14A.. ** The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A." "35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has not only inserted Section 14A by the Finance (Amendment) Act, 2001 but also made it retrospective, i.e., 1962 when the Income Tax Act itself came into force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to acc....
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....ncome. Once a proximate cause for disallowance is established - which is the relationship of the expenditure with income which does not form part of the total income, a disallowance u/s.14A has to be effected. And those expenditure incurred to earn exempt income cannot be allowed as business expenditure. 3.5 It is noted that the assessee has other business activities like providing consultation in respect of management of companies which has been treated as business income. Whatever expenditure falls outside the purview of 14A is be considered for computing income earned from such activities. 3.6 Thus, in our considered opinion after the decision of Maxopp Investment Ltd. V. CIT (Supra) by Hon'ble Supreme Court the argument that the business activity of assessee is to have controlling interest of companies and not to earn dividend income from the investments in shares, is no longer relevant. All expenditures incurred to earn exempt are to be disallowed u/s.14A. 3.7 However, we make it clear that as the assessee has income from other business activities as noted hereinabove, for computing income under the head of business and profession the expenditure incurred to earn such....
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.... further submitted by the Ld.AR that it is an ad-hoc disallowances by the Ld. AO as assessee has not maintain separate books of accounts. It is submitted that in view of the fact that the assessee is maintaining mixed financial statement, one can only attribute the expenditure incurred under the head personal expenses for the purposes of disallowances u/s 8D(2)(i) and the ad-hoc disallowance cannot be made. We have perused the facts and observed the factual position recorded in the impugned order. 7. It is noted that the personal expenses from part of schedule 14, being salary and bonus paid to employees. The said expenses are to be considered for the purposes of computing disallowance u/s 14A as these employees were involved in the activity of strategic investment made by the assessee. 7.1 However, it cannot be lost out of mind that there are other consultancy services rendered by the assessee towards which salary and bonus paid to these employees could be attributed. 7.2 We therefore clarify that the disallowance of the personal expenses may be recomputed after verifying the facts and to what extent these employees contributed towards strategic investments. Thereafter....