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2013 (11) TMI 810 - ITAT MUMBAIDisallowance u/s 40(a)(ia) - TDS u/s 194C - Work contract or manufacturing cum sale - Held that:- Provisions of section 194C are not attracted merely because a product or thing is manufactured according to the specifications of a customer unless raw material has been purchased from the customer who ordered the product - so long as the agreement is on principal to principal basis and the manufacturer has own establishment where the product is manufactured, and obtained material from its own source for manufacturing the product, without depending on the ultimate purchaser, merely because the purchaser desired to get the product with certain specifications, it cannot be said that there is a contract of job work between the purchaser and the manufacturer - It is not in dispute that the assessee did not supply any material to the manufacturer and the supply of final product was on principal to principal basis in which event provisions of section 194C are not applicable and payments made to the above mentioned two concerns are not attracted by provisions of section of 40(a)(ia) - excise duty was charged on the goods sold by the above mentioned parties. The claim that the agreement of sale was on principal to principal basis is not controverted by the Revenue. - Decided against Revenue. Disallowance u/s 14A - Held that:- It is well settled that the income need not be proportionate to the expenditure and vice-versa. In certain cases there may not be any income in the initial years though the assessee had incurred expenditure wholly and exclusively for the purpose of making or earning income on a particular head - merely because an assessee has not received dividend income in a particular year the expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income should not be disallowed. By applying the same logic, in the instant case also the assessee having made huge investment it cannot be said that there is no expenditure indirectly attributable to the investment and for earning the dividend income. In fact the Legislature having noticed that it is difficult to determine the exact amount of expenditure, which is indirectly attributable to earning of dividend income, the formula was discussed under section 14A read with Rule 8D of IT Rules - Decided in favour of Revenue.
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