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2019 (1) TMI 580 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - exclusion of expenses not related to exempt income - Held that:- The provision of Rule 8D requires to make the disallowance of the expenses even if the assessee claim that he has not incurred any expense in relation to such dividend income. But the AO before making the disallowance needs to refer the books of accounts. In the instant case, we note that the assessee has claimed total administrative expenses amounting to ₹ 8,73,482/- only. The detail of the same is placed out of such expenses, there were two major expenses of ₹ 2,45,000/- and 4,69,443/- under the head loss on sale of fixed assets and travelling expenses respectively. If we exclude these two major expenses the remaining expenses are of ₹ 1,59,039/- only which can only be considered for the purpose of disallowance u/s 14A r.w.r. 8D. It is because in our view the amount of expenses represented on account of loss on sale of fixed assets and travelling expenses cannot be linked with the expenses incurred for the purpose of earning the exempted income. We hold that the AO has made the disallowance u/s 14A r.w.r 8D without having regard to the books of accounts of the assessee as mandated under the provision of Section 14A r.w.r. 8D. We note that the assessee has claimed Demat charges amounting to ₹ 3,569/- which are directly connected with the dividend income as envisaged in the provision of Rule 8D (2)(i) of Income Tat Rule. Therefore, we sustained the addition of ₹ 3,569/- on account of Demat Charges. Thus, we set aside the order of CIT(A) and direct the AO to delete the addition of ₹ 5,70,349/- only. - Appeal of the assessee is partly allowed.
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