TMI Blog2017 (8) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 238,25,000 which are in the nature of administrative expenses directly attributable to her professional activity except demat charges of ₹ 574. Therefore, we are of the view that in the absence of any direct nexus between expenditure claim to the exempt income, the AO cannot invoke the provisions of section 14A r.w.r. 8D(2) to disallow expenditure. Hence, we direct the AO to delete disallowances made u/s 14A r.w.r. 8D, except demat charges of ₹ 574 which is directly incurred in relation to earning exempt income. - I.T.A No. 5620 And 5621 /Mum/2013 - - - Dated:- 28-7-2017 - Shri Mahavir Singh (JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Ms Mrugakshi Joshi For The Respondent : Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and the AO has failed to establish nexus between the expenditure incurred and the exempt income before disallowing expenditure by invoking provisions of Rule 8D. The CIT(A), after considering relevant submissions of the assessee and also relying upon certain judicial precedents, observed that the AO is under no obligation to record satisfaction, where the assessee has claimed that no expenditure has been incurred for earning exempt income. The CIT(A) further held that onus to prove that the expenditure incurred by the assessee are directly related to her professional income is on the assessee. In the absence of any such evidence, the AO was well within his jurisdiction to invoke the provisions of Rule 8D. In the circumstances, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has earned exempt income; however, failed to disallow any expenditure in relation to earning exempt income which is mandatory in nature even though the assessee claims that no expenditure has been incurred for earning exempt income in view of the specific provisions provided u/s 14A(3). The AO has rightly invoked the provisions of Rule 8D(2)(iii) to disallow expenditure and his order should be upheld. 6. We have heard both the parties and perused the material available on record. The AO invoked provisions of Rule 8D(2)(iii) and disallowed 0.5% of average value of investments towards expenditure in relation to earning exempt income. According to the AO, from AY 2008-09 onwards, in view of speci f ic provi s ions provided by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, we find that the assessee has maintained separate books of account for her professional income. We further observe that the assessee has not claimed any indirect expenditure in relation to earning exempt income. On further verification of the P L Account, we f ind that the assessee has claimed a minimum expendi ture of ₹ 3 lakhs against gross receipt of ₹ 28,25,000 which are in the nature of administrative expenses directly attributable to her professional activity except demat charges of ₹ 574. Therefore, we are of the view that in the absence of any direct nexus between expenditure claim to the exempt income, the AO cannot invoke the provisions of section 14A r.w.r. 8D(2) to disallow expenditure. Hence, we di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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