9911796707
TMI Blog2008 (3) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals have been taken: Grounds taken in ITA No. 3889/Del./05 : "That the learned CIT (Appeals) XIV, New Delhi has wrongly upheld the decision of ACIT(OSD), Ward 1(3), New Delhi for disallowing a sum of Rs. 7,67,706 out of personnel and administration expenses under section 14A of the Income-tax Act on an ad hoc and arbitrary basis on the assumption that these expenses were incurred for earning dividend income claimed to be exempt under the Income-tax Act. That the assessee prays for the leave to add, amend or vary the above grounds of appeal before or at the time of hearing." Grounds taken in ITA No. 2227/Del./05 : "That the learned CIT (Appeals) XIV, New Delhi has wrongly upheld the decision of Deputy CIT, Circle 11(1), New Delhi fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, learned DR relied on the orders of lower authorities and contended that certain disallowance of common expenses in impera-tive which might have been incurred for earning the exempted income. 5. We have considered the rival contentions and find from the record that during the years under consideration, the assessee claimed dividend income as exempt under section 10(33) of the Act. The Assessing Officer asked the assessee to explain as to why disallowance under section 14A be not made in respect of dividend income claimed to be exempt under section 10(33) of the Act. It was explained by the assessee that no expenditure was incurred by it for earning the dividend income. The assessee also filed details of investments made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the tax-free income. Accordingly, common expenditure incurred cannot be broken artificially to attribute for apportioning a part thereof to the earning of the tax-free income on the assumption that such part of the common expenditure was incurred in relation to the tax-free income. 7. Unlike the other provisions of the Income-tax Act, 1961 relating to allowance of various expenditure while computing business income, the provisions of section 14A deals with disallowance of expenditure incurred in relation to income not includible in total income. Where the assessee claims expenditure, the burden is on the assessee to prove incurring of expenditure and its relation to the business of the assessee. However, when the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in relation to income which is exempt from income-tax. In the instant case, the relevant assessment years under consideration are 2001-02 and 2002-03, to which the provisions of sub-sections (2) and (3) of section 14A is not applicable. The expenses for earning exempt income cannot be allowed to be deducted while computing any taxable income, however, at the same very time under section 14A of the Act, it is for the revenue to prove that the expenditure are incurred in relation to income which does not form part of total income. In the absence of such findings, the Assessing Officer is not entitled to presume on an ad hoc basis that some portion of the expenses have been incurred for earning the dividend income. Only the method is presc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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