9911796707
TMI Blog2013 (11) TMI 1639X X X X Extracts X X X X X X X X Extracts X X X X ..... IT. Act as per Rule 8(2) (iii) in respect of the exempt income U/S 10 (34) of the LT. Act calculated at .5% of average investment. 2.The Learned CIT (Appeals) -3 failed to appreciate that the AO has not given any reasons nor the details of the expenses which are considered disallowable as pertaining to the aforesaid exempt income. He failed to record a finding as contemplated by Section 14-A (2) having regard to the accounts and other facts and failed to establish any nexus whatsoever with any of the items of expenditure and exempt income. 3.The Learned CIT (Appeals) -3 erred in holding that expenses incurred in relation to exempt income would be estimated .5% of the average investment which is highly unjust on the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in the investment from last year to current year,that the assessee had debited expenditure of Rs. 3.79 Crores expenditure under the head of administrative and other expenses reflected in Profit and Loss Account, that Rs. 90.48 lakhs were claimed to be had been paid as interest and bank interest under the head interest and finance, that Rs. 3.40 lakhs were paid to bank as interest, that the claim of the assessee that no expenditure had been incurred for earning dividend income could not be accepted, that it was impossible to earn substantial dividend income without incurring any expenses. Referring to the decision of Citicorp Finance(India) Ltd.(108ITD471),he held that it was difficult to accept the hypothesis that one could earn subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. Sub section 3 provides that if any assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the Act, AO can make disallowance. Rule 8D deals with the methodology of calculating the disallowance. Now, we would like to consider the facts of the case under consideration.Assesse had earned exempt income and had disallowed Rs. 62,179/- on its own.As per the assessee except the said direct expenses it had not claimed any expenditure against the exempt income nor it had incurred any expenditure in this regard.We are aware that in the cases where ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in respect of such expenditure. Sub-s. (3) is nothing but an offshoot of sub-s. (2) of s. 14A. Sub-s.(3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-s.(2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-s. (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the AO, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. In taxation matters, recording of satisfaction is a pre-condition for invoking certain provisions e.g. section 132 or section148.AO has not recorded any reason as to why he was not satisfied with the explanation filed by the assessee. Mere mentioning that he was not satisfied with the correctness of the claim made by the assessee, is not sufficient. He has to mention the reason for rejecting the claim of the assessee in no uncertain terms. Therefore, we are not able to endorse the views of the AO that were confirmed by the FAA. In our opinion, considering the facts of the case under consideration, further verification is required. Therefore in the interest of justice we are remitting back the matter to the file of the AO. He is di ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
