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2013 (9) TMI 407 - AT - Income TaxDisallowance u/s 14A - Disallowance of interest expenditure - Held that:- if there is sufficient material on record to establish that investment in shares/units was made out of non-interest bearing funds, then no disallowance has to be made out of interest debited to Profit & Loss account, even if there is dividend income from such investment. Where the expenditure incurred could not be related to exempted income, the provisions of section 14A would also not be attracted. It is also a settled law that the theory of apportionment of expenditure between taxable and non-taxable income, has been accepted. However, Assessing Officer has to satisfy himself and such satisfaction must be arrived at on the objective basis. If benefit arising from investment in shares out of interest-bearing fund is the dividend income exempt u/s.10(34) of the Act, the related expenditure has to be disallowed - fact of the present case was that the Assessing Officer had not enquired the issue in the light of the above legal pronouncements. Specially the pronouncement of the Hon'ble Bombay High Court was not available at that time, hence, the Assessing Officer's assessment order was devoid of merits as also applicable law. Now we have got certain guidelines, though can not be said to be exhaustive or complete, but on these lines, the Assessing Officer is expected henceforth to compute the correct disallowance, needless to say after providing an adequate opportunity of hearing to the assessee - Following decision of Commissioner of Income Tax-II Versus M/s Hero Cycles Ltd. [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of assessee. Disallowance of foreign travel expenditure - Held that:- although written notices were furnished before the AO but the details of the expenditure, purpose of the expenditure and the business connection of those expenditures could not be established. Certain expenditures which were stated to be incurred for the visit of Ms. Year R. Amin, were restaurant expenditure, florist expenditure, etc., which is bearing at page 37 of the paper book. Likewise on page 91, there is a short note about the purpose of the visit but the assessee is required to produce the direct evidence to establish the genuineness of the claim. We, therefore, restore this ground also back to the stage of the AO, so that the assessee can avail this opportunity to produce certain evidences through which it could be established that the foreign travel was in fact undertaken for the purpose of the business of the assessee - Decided in favour of assessee.
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