The Tax Publishers2016 TaxPub(DT) 2986 (Mum-Trib)

 

Marico Ltd. v. Asstt. CIT

 

INCOME TAX ACT, 1961

--Disallowance under section 14A --Expenditure against exempt income ----Assessee had claimed that it had not incurred an expenditure to earn the exempt income and AO/CIT(A) had not brought on record any fact to prove that certain expenditure was incurred for earning dividend income. Therefore, disallowance made by both the authorities was not justified. However, considering the judgment of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 194 Taxman 203, reasonable disallowance could be made with regard to disallowance to be made under section 14A. Therefore, in the interest of justice, the disallowance was restricted to 5 per cent of the dividend income.--Assessee had earned certain sum of dividend income from investment in mutual funds. Assessee had argued that it had not incurred any expenditure in relation to the dividend income. However, AO did not accept the contention of the assessee and disallowed 50 per cent of the dividend income under section 14A. CIT(A) restricted the disallowance made by AO. Held: Assessee had claimed that it had not incurred an expenditure to earn the exempt income and AO/CIT(A) had not brought on record any fact to prove that certain expenditure was incurred for earning dividend income. Therefore, the action taken by both the authorities could not be endorsed. However, considering the judgment of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 194 Taxman 203, reasonable disallowance could be made for the year under consideration also with regard to disallowance to be made under section 14A of the Act. Therefore, in the interest of justice, the disallowance was restricted to 5 per cent of the dividend income.

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