|The Tax Publishers2020 TaxPub(DT) 5186 (Ahd-Trib)
INCOME TAX ACT, 1961
Section 14A Rule 8D
Expenditure attributable to earning of exempt income is to be disallowed and if the assessee has not debited any expenditure or has not claimed any expenditure for earning exempt income, then on presumptive basis expenditure cannot be calculated for disallowance.
Disallowance under section 14A - Expenditure against exempt income - Assessee not having claimed any expenditure for earning exempt income -
Assessee-company earned dividend income to the tune of Rs. 9,79,373. AO sought for information as to details of investments, from which assessee earned exempt income. Assessee furnished the details of investments and accordingly, the AO proceeded to calculate disallowance under section 14A read with rule 8D at Rs. 1,71,035. Assessee submitted that it had got net surplus interest of Rs. 45,38,011 and therefore, no disallowance of interest under section 14A read with rule 8D should be made. It was also submitted by assessee that no borrowed funds were utilized for earning the dividend income and that the dividend income was directly credited in its bank account and no expenditure was claimed in respect of earning exempt income.Held: A perusal of section 14A would indicate that the expenditure attributable to earning of exempt income is to be disallowed. If the assessee has not debited any expenditure or has not claimed any expenditure for earning exempt income, then on presumptive basis expenditure cannot be calculated for disallowance. In instant case, AO erred in calculating the average value of the investment income by the assessee. Investment income as on 31-3-2014 was Rs. 41,89,019 and that of 31-3-2013 was Rs. 41,89,019 and therefore, average value of investment income came to Rs. 41,89,019 instead of Rs. 1,07,72,757 taken by the AO. Further, the AO had wrongly taken interest expenses of Rs. 28,37,342 instead of Rs. 20,19,410 while working of disallowance. Accordingly, after considering all those facts, the disallowance under section 14A read with section 8D was calculated at Rs. 53,373 and the balance amount of disallowance was, accordingly, deleted.
FAVOUR : Partly in favour of assessee.
A.Y. : 2014-15
INCOME TAX ACT, 1961
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