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2012 (12) TMI 288 - AT - Income TaxDeduction u/s 14A - held that:- The object of section14A of the Act is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. In the present case, there is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which such shares were acquired. Mere fact that shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares. Proportionate amount should be disallowed having regard to the total income and the income from the exempt source. In the absence of any material disclosing the source of acquisition of shares which is within the special knowledge of the assessee, the assessing authority took a most reasonable approach in assessment - where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim - AO has to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act - restore the matter to the file of the AO for deciding the issue, afresh in accordance with law in the light of our aforesaid observations , after allowing sufficient opportunity to the assessee - In the result, appeal is partly allowed but for statistical purposes. Decision of Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - DELHI HIGH COURT] followed.
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