INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure incurred against earning of exempted income - Assessee not disallowing any expenses for earning exempt income under section 14A -

Assessee was indulged in the business of share trading. During the course of the scrutiny assessment proceedings, AO noticed that assessee had earned dividend income. AO noticed that the assessee had not disallowed any expenses for earning the exempt income under section 14A. AO was of the firm belief that disallowances under section14A read with rule 8D had to be made and accordingly computed the disallowance. Assessee strongly contended that no expenditure was incurred for earning the exempt income. Held: Since assessee had sufficient own interest-free funds, no disallowance should have been made considering the interest. In so far as the disallowance of administrative expenses was concerned, it was found that CIT(A) had restricted disallowance to the extent of the exempt income. Therefore, such disallowance was reasonable and needed no interference.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 36(1)(iii)

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