INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure against exempt income - Assessee prove that had incurred any expense against the exempted income -

Assessee claimed exempt income being dividend on shares. However, no corresponding disallowances of expenditure was made under section 14A. AO invoked rule 8D(2) and disallowed administrative expenses under third limb thereof. Assessee submitted that it had not incurred any administrative expenses. Held: Admittedly, assessee in the year under consideration earned exempted income. Therefore, expenses incurred by assessee in relation to such exempted income were to be disallowed under section 14A. However, assessee made no disallowance in the computation of income. Accordingly, in the absence of any disallowance by the assessee, the AO invoked section 14A read with rule 8D and made disallowance towards administrative expenses amounting to Rs. 60,000 only. The primary onus lies upon the assessee to justify, based on the documentary evidence, that it had not incurred any expense against the exempted income. But, assessee failed to discharge the onus imposed upon him, except contending that it has not incurred any expenses. Thus, AO in the absence of any material brought on record by the assessee in support of its contention, had no alternate except to make the disallowance as per the method prescribed under rule 8D. Therefore, disallowance was sustained.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 2(24)(x) & 36(1)(va)

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