TMI Blog2012 (7) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee. 1/4th ad-hoc disallowance of various expenses holding it to be of personal nature - Held that:- The assessee has incurred various expenses as listed in his paper book and suo-moto disallowed expenses from them. The A.O. has in addition to the disallowance made by assessee further disallowed the expenses. The disallowance of expenses by A.O. was adhoc in nature as he has not pointed out the expenses which are of non business in nature - as in the assessee’s own case in earlier years ITAT had restricted the disallowance pertaining to motor car and telephone expenses and the assessee has on the same basis suo-moto disallowed the expenses no point of any further disallowance - in favour of assessee. - I.T.A. No.2839 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidends, long term capital gains in shares and mutual funds. Assessee was asked to explain as to why expenses related to exempt income not to be disallowed u/s.14A r.w.s. 8D. The assessee submitted that it had not incurred any expenses for earning exempt income and further the investments were made out of own funds and savings. The explanation of the assessee was not acceptable to A.O. He worked out disallowance by invoking provision of Rule 8D and accordingly disallowed Rs.51,272/-. 6. Assessee being aggrieved by order of A.O. preferred appeal before CIT (A).CIT (A) confirmed the disallowance made by A.O. for the reason that the disallowance was considered necessary since assessee did not disallow any part of other expenses and further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d etc. The assessee has submitted that he has not incurred any expenses for earning the income. The A.O. has not given any clear finding of incurring of expenses, and has not established nexus of expenses incurred with the earning of exempt income. Section 14A (2) empowers the A.O. to determine the amount of expenses incurred in relation to tax free income if having regard to the account of the assessee, he is not satisfied with the correctness of the claim of the assessee . The satisfaction of the A.O. as to the incorrect claim made by the assessee is a pre-condition and a necessity for invoking the applicability of Rule 8D. A.O. can therefore proceed to invoke Rule 8D only when he is not satisfied with the correctness of claim by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elp and gardeners. The submissions made by the assessee were rejected by the A.O. for the reason that the residence of the assessee and the office consists of one composite structure and can be assessed from a common entrance. The office building is not a separate structure and does not have a separate compound. According to the A.O. the assessee had not furnished any convincing proof of demarcation between the residence and office. No other evidences like log book etc. showing quantum of business usage of car was produced before A.O.According to A.O., usage of office equipment for personal use was obvious considering the investments made by the assessee, lifestyle and the location. The reasoning that security is only for office and gardene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f disallowed part of motor car and telephone expenses for personal use. Which means personal use is not denied by the appellant. However, assessing officer disallowed expenses for personal use even out of computer expenses Rs.96,016/- and depreciation on all business assets. Regarding traveling expenses, appellant already treated personal expenses separately. Therefore as far as computer expenses are concerned, there is no element of personal use and accordingly disallowance out of computer expenses is not confirmed. As regards disallowance out of traveling expenses, since appellant claimed personal travelling expenses separately, further disallowance on account of personal element is not justified and accordingly the disallowance out of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the various expenses were listed. He pointed out from the summarized chart that the assessee had suo-moto disallowed Rs.7,082/- of telephone expenses and Rs.25,030/- of motor car expenses as being of personal in nature. According to Ld. A.R. the suo-moto disallowance made by assessee takes care of personal expenses and further no disallowance is called for. He also placed on page 99 of the paper book, the copy of the order of co-ordinate Bench, in assessee s own case for A.Y. 1979-80 and 1980-81, wherein the co-ordinate Bench had held that disallowance be restricted to 1/4th of telephone expenses and 1/5th of motor car expenses. Following the ITAT order, the assessee suo-moto disallowed expenses. He also placed on page 82 to 84 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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