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2015 (8) TMI 211 - AT - Income TaxDisallowance as per section 14A r.w.Rule 8D(2)(iii) - Disallowance of administrative expenses - the entire administrative expenses was incured by the assessee for the purpose of investment in shares - Held that:- The Assessing Officer while making the disallowance u/s 14A worked out the disallowance under Rule 8D(2)(iii) at ₹ 20,86,230/- which shows that the working under the provisions of Rule 8D negates the actual total expenditure debited by the assessee in the P&L account on administrative and other expenses. In any case, disallowance cannot be made more than the total expenses debited to the P&L Account. From the details of the expenses, it is clear that most of the expenses are specific in nature and exclusively incurred for the business activity of the assessee. Therefore, the expenses on account of auditor fee, legal and professional fees, profession tax, business support fees cannot be said to have any direct or proximate nexus with the activity of investment or earning the exempt income. Thus the disallowance u/s 14A can be made only to the extent of allocation of these expenses which has direct or proximate nexus with earning of exempt income. From the details of the expenses, we find that the prining and stationary expenses and bank charges & commision are only two items which could have direct or proximate nexus with the investment and exempt income. Therefore, the disallwoance u/s 14A r.w. Rule 8D(2)(iii) cannot exceed to the allocable expenses incurred by the assessee for a composite activity resulting taxable and exempt income. The working of disallowance under Rule 8D(2)(iii) by the Assessing Officer clearly shows that it exceeds not only the expenses debited and claimed by the assessee which could have a proximate nexus with the earning of exempt income but also to the total expenditure debited by the assessee in the P&L account under the head administrative and other expenses. Therefore, it turns out to be contradictory to the actual facts and gives absured results in complete disregard to the scheme of disallowance u/s 14A. Accordingly, we delete the disallowance made by the Assessing Officer. - Decided in favour of assessee.
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