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2014 (11) TMI 1274 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Whether investment made in partnership firm does not represent “Investment”? - HELD THAT:- AO does not appear to have examined the application of the provisions of sec,. 14A by having regard to the accounts of the assessee. We notice that the assessing officer has asked the assessee to work out the disallowance. Assessee excluded investment made in partnership firm as it does not represent “Investment”. AO did not examine the above said claim of the assessee and also failed to note the inconsistencies in working out the average value of investments. All these discussions would show the half hearted approach adopted by the assessing officer and his carelessness in examining the workings furnished by the assessee vis-à-vis the accounts of the assessee company. We also find that the assessee has also failed to explain as to how the provisions of sec. 14A shall not apply to the share income from partnership firms, which consisted of 99.5% of its income. The assessee has further canvassed the view that the provisions of sec. 14A r.w. Rule 8D should not be applied to Variable expenses, which consisted of expenses incurred directly on the projects undertaken by it. With regard to the Fixed/semi-variable expenses, the assessee submitted that the disallowance may be restricted to 5% of the said expenses. Though the assessee did not give any basis for adopting the above said rate of 5%, yet the Ld CIT(A) has accepted the same. Both the tax authorities have addressed the issue of disallowance to be made u/s 14A of the Act from the point of view of “dividend income” only. Further the disallowance has been made with reference to Administrative expenses only. As noticed earlier, both the tax authorities have failed to make reference to the accounts of the assessee.Decided against revenue.
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