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Mr. M.A. Alagappan Versus The ACIT, Corporate circle 3 (1) , Chennai

2017 (7) TMI 427 - ITAT CHENNAI

Disallowance u/s.14A r.w.Rule 8D(2)(iii) - Held that:- Even in a case where the assessee claims that no expenditure was so incurred, the statute has provided for a presumptive expenditure which has to be disallowed by force of the statute. In a distant manner, literally speaking, it may even be considered for the purpose of convenience as a deeming provision. When such deeming provision is made on the basis of statutory presumption, the requirement of factual evidence is replaced by statutory pr .....

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CHANDRA POOJARI, ACCOUNTANT MEMBER, AND Shri Duvvuru RL Reddy, JUDICIAL MEMBER For The Appellant : M.Karunakaran, Advocate For The Respondent : Mr.Durai Pandian, JCIT, Departmental Representative ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-11, Chennai dated 14.10.2016 pertaining to assessment year2012-13. 2. The only issue raised in his appeal is with regard to disallowance of ₹ 12,22,441 .....

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e is in appeal before us. 4. The ld.A.R submitted that in assessment year under consideration assessee has not made any investment yielding exempted income in the assessment year and also not incurred any expenditure to earn exempted income. According to him, all the investments were made before starting the profession of Management Consultation . According to him, there is no requirement of disallowance u/s.14A r.w.Rule Rule 8D(2)(iii). The assessee has not incurred any expenditure towards earn .....

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ation to the income which does not form part of total income has to be disallowed. However, it should be proximate relationship between the expenditure and the income, which does not form part of total income. Once such proximity relationships exist, the disallowance is to be effected. In case the assessee had claimed that ho expenditure has been incurred for earning the exempt income, it was for the assessing officer to determine as to whether the assessee had incurred any expenditure in relati .....

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a view to earn taxable income and there is apparent dominant and immediate connection between the expenditure incurred and taxable income, then no disallowance can be made under section 1 4A merely because some tax exempt income is received by the assessee. 5.2 Averting to the facts of the case in hand, the assessee had made a claim that no expenditure has been incurred or claimed for earning the exempt income. From the details of the expenditure, it is clear that the expenditure incurred and c .....

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fessional income; but are incurred in relation to dividend income or such expenditure is incurred for inseparable and indivisible activities comprising professional as well as the activities on which is exempt income has been earned by the assessee, then in the absence of any such instance of expenditure, finding of Assessing Officer or any material to show that the expenditure incurred and claimed by the assessee against the taxable income has any relation for earning the exempt income, the pro .....

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allowed any expenditure of personal nature out of the income from business or profession in the computation of income in the assessment order. In view of this we are of the opinion that the expenditure claimed in the business of share dealings cannot be correlated to the incomes earned in personal capacity that too on dividend, PPF interest and tax free interest on RBI bonds. In view of this, we are of the opinion that estimation of expenditure of 20,000/- out of business expenditure claimed in .....

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section (2) & (3) of section 14A, there is no question of disallowing the amounts invoking Rule8D. Therefore, the CIT(A) s direction on this is set aside and the additions so made by the A.O. in the computation of business income is deleted. Ground is considered allowed. 5. The ld.D.R relied on the order of lower authorities. 6. We considered the arguments of both the sides in detail. Sec.14A(1) declares the law that the expenditure incurred by the assessee in relation to the income which do .....

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