TMI Blog2005 (1) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... d that assessee has incurred expenses on Demat for Rs. 63,324, Share Stamp charges of Rs. 18,936, the total of these two expenses works out to Rs. 82,260. In the assessment order the Assessing Officer has disallowed Rs. 73,608 only as expenses attributable to earning of dividend which is claimed exempt u/s 10(33) of the Income-tax Act, 1961. From the perusal of administrative and other expenses it can be seen that assessee has claimed computer expenses of Rs. 49,500, conveyance expenses of Rs. 28,577.50 and salary expense of Rs. 2,60,933. In the income side total income shown is Rs. 4,42,577.75 which comprises of Rs. 3,40,170.75, being dividend exempt u/s 10(33), Commission received Rs. 15,000 and Warehousing Charges of Rs. 87,407.00. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or earning dividend therefore, it cannot be said that any expenditure can be attributed to dividend income. In support of this contention before the Assessing Officer assessee relied on the decision of CIT v. General Insurance Corpn. of India (No. 2) [2002] 254 ITR 204 (Bom.). The Assessing Officer rejected the explanation of the assessee, observed as under : "The Explanation offered by the assessee is not acceptable as the dividend is exempt under section 10(33) and is not forming part of total income. In view of this expenditure on earning dividend income proportionately is disallowed. The total expenditure debited to profit and loss account works out to Rs. 23,49,910 ( i.e., administrative expenses and depreciation), the proportionate ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in confirming the disallowance of administrative expenditure of Rs. 73,608 under section 14A of Income-tax Act. On the facts and circumstances of the case the appellant submit that allocation of expenditure and depreciation amounting to Rs. 73,608 is not justified and be deleted. 2. The appellant submit that no expenditure has been incurred for earning dividend income and the Assessing Officer has also not proved that the appellant has incurred direct expenses for earning dividend income. On the facts and circumstances of the case the appellant submits that allocation of pro rata expenses to dividend income is not justified. 3. Without prejudice to ground Nos. 1 and 2 the appellant further submits that depreciation cannot be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportionment of expenditure was correctly made by the Assessing Officer whose view has been upheld by the CIT(A), therefore, the order of the CIT(A) be upheld. 6. Having heard both the sides carefully I have gone through the orders of authorities below. But section 14A of Income-tax Act provides that for the purpose of computing total income under Chapter-IV ( i.e., sections 14-59) no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income under the Income-tax Act. Admittedly, dividend is exempt under section 10(33) of the Income-tax Act, 1961. In view of this Assessing Officer is required to disallow expenditure incurred in relation to earning of dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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