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2021 (7) TMI 3 - AT - Income TaxDisallowance of depreciation on car - AO has made ad hoc disallowance of 25% of depreciation on car, on the ground that use of car for personal purposes cannot be ruled out - HELD THAT:- AO has disallowed ad hoc depreciation on car without bringing on record any evidence to prove that the assessee has used car for personal purpose. No doubt, if an asset is used for personal purpose, expenses relatable to such personal use can be disallowed. However, before doing so, it is for the AO to bring on record to suggest use of asset for personal purpose. In this case, nothing has been brought on record to prove the case of the AO that car was used for personal purpose. Therefore, we are of the considered view that the AO was erred in making ad hoc disallowance of depreciation on car and hence, we direct the AO to delete addition made towards ad hoc disallowance of depreciation on car. Disallowance u/s 14A - AO has determined disallowance of ₹ 2,19,054/- u/s. 14A by invoking Rule 8D of the IT Rules, as against total exempt income being dividend income earned for the year at ₹ 1,990/- - HELD THAT:- It is a well settled principle of law that disallowance contemplated u/s. 14A of the Act, cannot exceed exempt income earned for the year. In this case, although the assessee has earned exempt income of ₹ 1,990/-, the AO has determined disallowance of ₹ 2,19,054/- which is over and above exempt income earned for the year, contrary to the legal position. CIT(A) after considering relevant facts has rightly restricted disallowance to the extent of exempt income. Therefore, we are of the considered view that there is no error in findings recorded by the ld. CIT(A) to restrict disallowance to the extent of exempt income and hence, we are inclined to uphold the findings of ld. CIT(A) and reject ground taken by the assessee. Appeal filed by the assessee is partly allowed.
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