TMI Blog2016 (2) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 2.32 crores are received from 3 group companies and an amount of ₹ 1.40 lakh has been earned on shares held for trading activities, disallowance of ₹ 4,77,740/- appears to be on the higher side. Various Benches of the Tribunal are taking the view that some expenditure on account of administrative expenses has to be disallowed on reasonable estimate basis under such circumstances. Considering the totality of the facts of the case, disallowance of ₹ 50,000/- on estimate basis under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. - Decided partly in favour of assessee. - ITA No.1151/PN/2014 - - - Dated:- 8-1-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee by : Shri Nikhil Pathak For The Department by : Shri Hintendra Ninawe ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 29-11-2013 of the CIT(A)-I, Pune relating to Assessment Year 2007-08. 2. Disallowance of ₹ 4,77,740/- u/s.14A by the AO and upheld by the CIT(A) is the only issue raised by the assessee in the grounds of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been received from 3 group companies, namely Finolex Cables Ltd., Finolex Industries Ltd and Finolex Plasson Industries Ltd., shares of which were held as promoters holding. It was stated that the shares are held as long term investments and the dividend on them was directly credited to the assessee s bank account being only credit per company during the whole year and no expenditure whatsoever has been incurred to earn this dividend income. It was further submitted that the remaining portion of the dividend income of ₹ 1,40,200/- claimed as exempt was earned on shares held for trading is merely incidental to the activity of share trading and no expenditure was incurred to earn the said dividend. It was argued that no direct expenses was also incurred in earning such exempt income and no borrowed capital was deployed to make the corresponding investments. This is evident from the fact that the AO had not quantified any amount under sub-rule (i) of Rule 8D while making the disallowance. It was further submitted that the AO has not established that there was any nexus between the investments made to earn the exempted income and the expenditure claimed or any specific instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to the profit and loss account of ₹ 12,82,011/- is more than reasonable. 8. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 9. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). Referring to the copy of audited profit and loss account for the year ending 31-03-207, a copy of which is placed at page 13 of the paper book he drew the attention of the Bench to the profit from share trading and financing business at ₹ 15,19,244/-. Similarly, he drew the attention of the Bench to the dividend received on ₹ 2,32,09,107/- for the year ending 31-30-2007. Referring to schedule 8 of the audited accounts, a copy of which is placed at page 20 of the paper book he drew the attention of the Bench to the dividend income of ₹ 1,40,200/- which has been received on shares held as stock in trade. Referring to page 16 of the paper book he drew the attention of the Bench to the investments held by the company according to which the total investment during the year was ₹ 11.69 crores as against ₹ 11.47 in the preceding assessment year. He submitted that no disallowance u/s.14A has been made by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 he submitted that the Tribunal following the decision of the Tribunal (Third Member) in the case of Wimco Seedlings Ltd. has deleted the disallowance made by the AO on presumptions which was upheld by the CIT(A). The Tribunal held that the approach of the AO cannot be proved especially when he has not established any nexus between the expenditure and the exempt income. He also relied on the decision of the Pune Bench of the Tribunal in the case of Apoorva Patni Vs. Addl.CIT reported in 24 taxmann.com. 223. He accordingly submitted that no disallowance u/s.14A is called for in the instant case. 12. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). Referring to Para 5.5 of the order of the CIT(A) the Ld. Departmental Representative submitted that the CIT(A) has given a finding on the basis of the financials of the assessee company that the assessee has filed one common profit and loss account for all the activities of the assessee and the expenses incurred for all the activities are debited to the common profit and loss account. Therefore, the submission of the assessee that there was no dominant and immediate connection between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. We find some force in the above arguments of the Ld. Counsel for the assessee. We find the Delhi Bench of the Tribunal (Third Member) in the case of Wimco Seedlings Ltd. (Supra) has categorically held that u/s.14A only the expenditure which has been proved to have been incurred in relation to the earning of tax free income can be disallowed and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning the tax free income. It has further been held that common expenditure at the head office etc. cannot be broken up artificially to attribute or apportion 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 dividend income. However, it is also a fact that no separate books of account are maintained for taxable income and exempt income. The assessee has prepared one common profit and loss account. Therefore, it cannot be said that no expenditure has been incurred at all for earning the exempt income. However, considering the fact that out of total dividend income of ₹ 2.34 crores an amount of ₹ 2.32 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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