TMI Blog2014 (9) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... t is practically impossible to specify which particular portion of the expenditure was incurred for the purpose of earning dividend income - the assertion of the assessee that no expenditure was incurred for earning of dividend income is a bald assertion, contrary to the obvious facts on record and the satisfaction of the AO that some expenditure was incurred for earning of exempt income is based upon the facts of the case – thus, a proper satisfaction as required by Section 14A was duly recorded by the AO and, he was fully justified in working out the disallowance as per Rule 8D of the Income-tax Rules, 1962 - as far as the discrepancy in the working of Rule 8D is concerned, the matter is remitted back to the AO for verification of working of Rule 8D – Decided partly in favour of assessee. - ITA No. 5417/Del/2012 - - - Dated:- 29-8-2014 - Shri G. D. Agrawal And Shri Chandra Mohan Garg,JJ. For the Appellant : Shri Prem Nath Monga and Shri Manu Monga, Advocates. For the Respondent : Smt. Parwinder Kaur, Sr.DR. ORDER Per G. D. Agrawal, VP : This appeal by the assessee is directed against the order of learned CIT(A)-XXVIII, New Delhi dated 28th August, 2012 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the Larger Bench rather than taking a different view. He alternatively submitted that if the Bench does not agree with the contention of the assessee that on the facts of the assessee's case, no disallowance under Section 14A is required, the working of the Assessing Officer as per Rule 8D is defective because the interest payment of ₹ 1,54,187/- was in respect of late payment of TDS. Therefore, no part of its can be apportioned for earning of dividend income. Similarly, while working out the half percent of average amount of investment, the Assessing Officer took the wrong figure of the total assets at the beginning as well as at the end of the year. He stated that the correct working of the disallowance under Rule 8D would be ₹ 6,23,494/- and not ₹ 7,52,242/-. 5. Learned DR, on the other hand, relied upon the orders of authorities below and she stated that proper satisfaction is recorded by the Assessing Officer for application of Section 14A and he has also worked out the disallowance as per Rule 8D. If there is some clerical mistake in the working of the disallowance, the Assessing Officer may be directed to verify and correct the same. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is not satisfied with the correctness of the claim of the assessee. From a combined reading of sub-section (2) (3) of Section 14A, it is evident that first the assessee has to state whether any expenditure was incurred by him for earning of exempt income, if yes, then, he has to specify the expenditure which was incurred for earning of exempt income. Thereafter, the Assessing Officer is required to examine the assessee's claim with regard to incurring of no expenditure or with regard to the amount of expenditure claimed to have been incurred by the assessee for earning of exempt income. If the Assessing Officer is satisfied with the claim of the assessee, then, no further action under Section 14A is required except to disallow the amount of expenditure, if any, which assessee claimed to have incurred for earning of exempt income. However, when the Assessing Officer is not satisfied with the claim of the assessee with regard to incurring of no expenditure or the amount of expenditure specified by the assessee for earning of exempt income, then, he is required to determine the amount of expenditure incurred by the assessee in relation to earning of exempt income. Such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee:- Disallowance as per 14A r/w Rule 8D Rule 8D(2)(i) 0 Rule 8D(2)(ii) 101633 Rule 8D(2)(iii) 650609 Total 752242 9. After considering the facts of the assessee's case and the arguments of both the sides, we are unable to agree with the contention of the learned counsel that the satisfaction of the Assessing Officer is a bald satisfaction without specifying any particular item of the expenditure which was incurred for earning of dividend income. That Hon'ble Jurisdictional High Court has considered the meaning of the expression in relation to in the decision of Maxopp Investment Ltd. Vs. CIT - [2012] 347 ITR 272 (Delhi) and held as under:- The expression in relation to does not have any embedded object. It simply means in connection with or pertains to . If the expenditure in question has a relation or connection with or pertains to exempt income it cannot be allowed as a deduction even if it qualifies under other provisions of the Act. The actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in 17 different mutual funds during the year under consideration. It cannot be believed that no effort was involved in the entire process. The telephone expenses claimed by the assessee are ₹ 7,11,999/-, travelling conveyance expenses are ₹ 7,72,247/-, salary to the staff is ₹ 7,17,138/- and directors' remuneration is ₹ 8,50,600. It cannot be accepted that not a single phone call was made by the assessee relating to purchase and sale of mutual funds, no employee ever traveled for the purpose of either making investment or for liquidating mutual funds, no staff or the director devoted any time for the purpose of investment or liquidation of mutual funds. In our opinion, when there is investment in large number of mutual funds and moreover during the year under consideration various mutual funds were liquidated and investment made in various new mutual funds, certainly, the assessee must be keeping details in a systematic manner and some staff must be doing that job. For the purpose of liquidation as well as investment in the mutual funds, some effort and some paper formalities are certainly required. So far as assessee's contention is concerned t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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