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2016 (2) TMI 373 - AT - Income TaxDisallowance u/s 14A - no separate books of account are maintained for taxable income and exempt income. - Held that:- Addition u/s.14A only the expenditure which has been proved to have been incurred in relation to the earning of tax free income can be disallowed and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning the tax free income. It has further been held that common expenditure at the head office etc. cannot be broken up artificially to attribute or apportion a part thereof to the earning of the tax free income on the assumption that such part of the common expenditure was incurred in relation to the tax free dividend income. However, it is also a fact that no separate books of account are maintained for taxable income and exempt income. The assessee has prepared one common profit and loss account. Therefore, it cannot be said that no expenditure has been incurred at all for earning the exempt income. However, considering the fact that out of total dividend income of ₹ 2.34 crores an amount of ₹ 2.32 crores are received from 3 group companies and an amount of ₹ 1.40 lakh has been earned on shares held for trading activities, disallowance of ₹ 4,77,740/- appears to be on the higher side. Various Benches of the Tribunal are taking the view that some expenditure on account of administrative expenses has to be disallowed on reasonable estimate basis under such circumstances. Considering the totality of the facts of the case, disallowance of ₹ 50,000/- on estimate basis under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. - Decided partly in favour of assessee.
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