2012 (9) TMI 626 - DELHI HIGH COURT

Revision ou/s 263 - proportionate expenditure related to the dividend income claimed exempt u/s 10 (33), as per provisions of section 14A - revenue appeal - Held that:- The record reveals that the AO had issued notice and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly Rs. 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under Section 14-A had not been made. Now, while the statutory direction to the AO to calculate, proportionately, the expenditure which an assesse may incur to obtain dividend income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case.

In the present case, it was repeatedly emphasized that the assesse’s dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned even the Commissioner has not sought to undermine this aspect. Equally, there is no material to say that apart from that single dividend warrant, any other dividend income was received. Furthermore, there is nothing on record to say that the assessee had to expend effort, or specially allocate resources to keep track of its investments, especially dividend yielding ones. In these circumstances, it can be said that whether the deduction under Section 14-A was warranted, was a debatable fact. In any event, even if it were not debatable, the error by the AO is not “unsustainable”. Possibly he could have taken another view yet, that he did not do so, would not render his opinion an unsustainable one, warranting exercise of Section 263 - in favour of assessee.