TMI Blog2015 (8) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... me - Held that:- There is no dispute that the assessee’s business activity is real estate development inclusive of purchasing, selling, developing, constructing, hiring or otherwise dealing in real estate. Since the assessee has not started the development activity and was having its own fund, therefore, the assessee has invested some of the fund in mutual fund and other part in ICDs. It is apparent from the facts and circumstances of the case that the assessee is earning dividend income and appreciation of investment from the investment in the mutual fund and further certain part of the surplus fund is used for ICDs for earning the interest income. The investment in mutual fund and ICDs is not a regular business activity of the assessee. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofession as correctly offered by the assessee. Ground No.4: The appellant prays that he may be allowed to add, amend, alter or forego any of the above grounds of appeal as the circumstances may warrant. Ground No. 5: The above grounds are without prejudice to each other. 2. Ground No.1 and 2 is regarding disallowance under section 14A r.w. Rule 8D. The assessee is engaged in the business of real estate development . During the course of assessment proceedings the AO noted that the assessee made investment of ₹ 45 .00 crores and received exempt income of ₹ 25,52,571/- on the said investment. The AO further noted that the assessee had made disallowance of ₹ 76,200/- to earn the above exempt income. The AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR has further submitted that for the assessment year2008-09 the AO worked out the disallowance under section 14A at 10% of the dividend income. The CIT(A) has followed the decision from the assessment year 2008-09, and however, sustained the disallowance made by the AO. Thus the ld. AR has submitted that when the AO itself has given a finding that only 10% of the dividend income can be taken as the expenditure allocable for earning dividend income for the assessment year 2008-09 then, the AO cannot take a different view on this issue for the year under consideration. 3.1 On the other hand the ld. DR has submitted that the assessee itself has made a disallowance under section 14A which shows that the assessee has accepted the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the total income has to be disallowed u/s. 14A. Only when such expenditure has a direct or proximate relation with the income exempt has to be disallowed. In the case when there is no direct expenditure incurred for earning the exempt income then the allocation or apportionment of expenditure has to be made only when there is a nexus between expenditure incurred and exempt income. In the case in hand the AO has not conducted any enquiry to find out which are the other expenditure which can be attributable for earning the exempt income. If the AO is not satisfied with the claim of the assessee and correctness of the claim in relation to the expenditure for earning exempt income then the AO is supposed to conduct an enquiry and find out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of disallowance can not be different. Accordingly we direct the AO to restrict the disallowance to 10% of the expenditure incurred for composite activity resulting in exempt income as well as taxable income. The above directions are given in peculiar facts and circumstance of the case and to maintain the rule of consistency, therefore, would not be applied as precedence. 5. Ground No.3 and 4 is regarding treatment of interest income as income from other sources instead of business income. We have heard the ld. AR and the ld. DR and considered the relevant material on record. 5.1 The ld. AR has submitted that interest income has been earned by the assessee on the inter-corporate deposits (ICDs) which is a regular systematic activ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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