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2016 (5) TMI 1464 - AT - Income TaxAdditions u/s 14A - assessee contented formula under Rule 8D has been applied without establishing any nexus between exempt income and expenditure incurred thereon for earning such exempt income - Held that:- The investments would definitely involve certain administrative and establishment cost since the decision to make investments, track investments, sale of such investments and follow-up of the receipt of income, sale proceeds etc have to be undertaken which entails definite costs. It is for this purposes that Rule 8D(2)(iii) provides that one half percent of the average value of the investments will be deemed to be expenditure incurred for the same. When the Act has specified a definite formula for working out the expenditure to be disallowed, the Department is not required to establish the nexus between the exempt income and expenditure incurred thereon for earning such exempt income. In view of the law laid down by the statute, since the assessee has not excluded any expenditure relatable to earning exempt income, AO has disallowed ˝ % of average value of the investments as per Rule 8D(2)(iii) as expenditure incurred for earning of exempt income and the ld. CIT(A) has rightly confirmed the disallowance made by the AO. - Decided against assessee. Disallowance under section 35D - Held that:- In the present case, the assessee is stated to have incurred expenditure for creating intangible content of the motion picture industry. The expansion activity has not been completed in the assessment year under consideration as accepted by the assessee and therefore, either expansion activity has been completed or the production activity of the assessee has been carried out for which the assessee has claimed amortization of expenses under section 35D which in our opinion is not permissible. CIT(A) has elaborately discussed the issue with regard to claim of deduction u/s 35D by relying on various decisions and the assessee could not counter the findings of the CIT(A). Thus, we confirm the order of the CIT(A) - Decided against assessee.
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