9911796707
TMI Blog2012 (10) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. Act, 1961 dated 29/12/2009 were that the assessee in individual capacity is earning salary income, income from other sources, i.e. interest income and dividend income. On verification of Profit & Loss account, it was noticed by the Assessing Officer that the assessee had debited an amount of Rs.2,15,003/- pertaining to interest on O/D Account. The assessee has also debited an amount of Rs.4,63,197/- pertaining to "other interest paid". As per the computation of income, the assessee has claimed the aforesaid amounts against the interest income. The Assessing Officer has also noted that the assessee has earned non-taxable dividend income of Rs.20,44,487/-. As per Assessing Officer, since the dividend income was claimed as an exempt income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no direct nexus. On the other hand, the Assessing Officer has brought out that such funds are used as investment in shares and given as advance for land at Gotri. This has ot been rebutted by the Authorized Representative. Further the claim of the Authorized Representative that against the bank FDR, the assessee has taken O/D on which interest expenses have been incurred, hence there is a nexus between interest earned (on bank FDR) and interest expenses (on bank O/D) and only because of that the deduction should be allowed, is not acceptable. The assessee has to further demonstrated that the funds taken on O/D have been used to earn taxable income. In the absence of such a forward nexus, the deduction for interest expenses cannot be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpted income is to be disallowed only if the Assessing Officer is satisfied with the expenditure claimed by the assessee pertaining to the said exempt income. Rather, the Ho'nble Court was very specific that in case, no such exercise was carried out by the Assessing Officer then the matter is to be remanded back for afresh investigation. It has also been made clear that the proviso to section 14A of the Act was effective from 2001-02. The Hon'ble Court has also pointed out the importance of Rule 8D of the I.T.Rules, 1962. It was made clear that sub-section (1) to section 14A was inserted with retrospective effect from 01/04/1962, however, sub-sections (2) & (3) were made applicable with effect from 01/04/2007. The proviso was inserted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njal Sales Corporation (supra) and Radhasoami Satsang (supra) holding that there must be consistency and definiteness in the approach of the revenue would not apply to the facts of the present case, because of the material change introduced by Section 14A by way of statutory disallowance in certain cases. There, the decisions of the Tribunal in the earlier years would have no relevance in considering disallowance in assessment year 2002- 2003 in the light of Section 14A of the Act. 73. For the reasons which we have indicated, we have come to the conclusion that under Section 14A(1) it is for the Assessing Officer to determine as to whether the assessee had incurred any expenditure in relation to the earning of income which does not form pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the recipient of dividend, income by way of dividend does not form part of the total income by virtue of the provisions of Section 10(33). Income from mutual funds stands on the same basis; iii) The provisions of sub sections (2) and (3) of Section 14A of the Income Tax Act 1961 are constitutionally valid; iv) The provisions of Rule 8D of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008 are not ultra vires the provisions of Section 14A, more particularly sub section (2) and do not offend Article 14 of the Constitution; v) The provisions of Rule 8D of the Income Tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment Year 2008-09; vi) Even prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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