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2017 (8) TMI 845 - AT - Income TaxAddition u/s 14A - nexus between the expenditure claimed by the assessee and earning exempt income - adhoc disallowance of certain expenditures - Held that:- In the absence of any direct nexus between expenditure claim to the exempt income, the AO cannot invoke the provisions of section 14A r.w.r. 8D(2) to disallow expenditure. Hence, we direct the AO to delete disallowances made u/s 14A r.w.r. 8D except demat charges of ₹ 574 which is directly incurred in relation to earning exempt income. On further verification of the P&L Account, we find that the assessee has claimed a minimum expenditure of ₹ 3 lakhs against gross receipt of ₹ 238,25,000 which are in the nature of administrative expenses directly attributable to her professional activity except demat charges of ₹ 574. Therefore, we are of the view that in the absence of any direct nexus between expenditure claim to the exempt income, the AO cannot invoke the provisions of section 14A r.w.r. 8D(2) to disallow expenditure. Hence, we direct the AO to delete disallowances made u/s 14A r.w.r. 8D, except demat charges of ₹ 574 which is directly incurred in relation to earning exempt income.
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