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2014 (1) TMI 944 - ITAT PUNEDisallowance made u/s 14A of the Act – Held that:- Before making the aforesaid disallowance, it is imperative for the Assessing Officer to establish that the expenditure has been incurred in relation to the earning of tax-free income - relying upon Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - once a proximate cause for the disallowance is established, which is the relationship of the expenditure with income which does not form part of the total income then a disallowance under Section 14A of the Act has to be effected - Factually, there is no negation by the assessee to the assertions of the Assessing Officer - there is a proximate cause for the disallowance under Section 14A of the Act - The matter being a factual aspect needs determination at the level of the Assessing Officer - thus, while upholding in the principle, the disallowance under Section 14A of the Act , the matter remitted back to the AO to restrict the same only to the expenditure incurred in relation to earning of the exempt income – Decided in favour of Assessee. Disallowance made u/s 40(a)(ia) of the Act – Held that:- The provisions of Section 40(a)(ia) of the Act are applicable on payments made by the assessee towards earth moving charges which also contained an element of transportation charges - The element of transportation charges required deduction on tax at source and in the absence of any such deduction, the provisions of Section 40(a)(ia) of the Act has been invoked - apart from a bald assertion there is no other detail or information mentioned in the assessment order as to the similarities with other cases so as to justify the adoption of 25% - the entire exercise involves an element of estimation and guess work - it would be fit and proper to accept the estimate made by the assessee at 10% of the total expenditure – the AO is directed to restrict the disallowance to 10% of the earth moving charges – Decided in favour of Assessee. Disallowance made u/s 40A(3) of the Act – Held that:- The income of the assessee from business has not been estimated so as to justify the proposition being advanced - The disallowance under Section 40A(3) of the Act is a specific disallowance - the assessee has not advanced any reason – Decided against Assessee.
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