TMI Blog2017 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... made disallowance just by holding that some expenditure must have been incurred. Judgment of CIT Vs. Taikisha Engineering India Ltd. [2014 (12) TMI 482 - DELHI HIGH COURT] is applicable and no disallowance is warranted as it held that the Assessing Officer at the first instance must examine the disallowance made by the assessee or the claim of the assessee that no expenditure was incurred to earn the exempt income. If and only if the Assessing Officer is not satisfied on this count after making reference to the accounts, that he is entitled to adopt the method as prescribed i.e. Rule 8D of the Rules. Thus, Rule 8D is not attracted and applicable to all assessee who have exempt income and it is not compulsory and necessary that an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles of natural justice. 3. The assessee is engaged in the business of Dealership for products of JCB India Ltd. (Sales, Services and Spares) and share trading. It has also shown rental income and income from long term capital gain during the year under consideration. During the year under consideration, the assessee claimed exempt dividend income of ₹ 1,00,84,565/-. The Assessing Officer gave a finding that the assessee incurred indirect expenses to earn the dividend income and therefore, made disallowance u/s. 14A of the Act for ₹ 38,68,698/-. Further during the year, the assessee declared ALV of one M Block Property at ₹ 21,063/- whereas for the reasons given in details in AY 1996-97, the ALV was taken at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... top management is required, financial resources and infrastructure of the appellant company are required to be used and therefore the claim of the appellant that no expenditure was incurred cannot be accepted. The AO has applied the formula prescribed in Rule 8D for computing the disallowance u/s 14A. However, the AO has included entire investment in the mutual funds without looking into the categories of mutual funds which includes debt funds and growth funds income from which is taxable and therefore, the same cannot be included in the average investment for the purpose of computing disallowance under Rule 8D. Once we exclude the investment made in debt funds and growth funds, the average investment in shares, mutual funds and growth fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 8780/- only. In this connection, the Ld. AR submitted that in respect of let out property, the rent received is usually taken as Annual Lettable Value (ALV) and municipal taxes are to be deducted from the ALV, if the following conditions are satisfied: a) The property is let out during the whole or part of the year. b) The Municipal taxes must be borne by the landlord. c) The municipal taxes must be paid during the year, where the municipal taxes have become due but have not been actually paid, the same will not be allowed. Hence, municipal taxes may be claimed on payment basis i.e. only in the year in which they are paid. The Ld. AR submitted that in the present case, the assessee company had paid municipal tax of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that expenditure directly related to exempt income was nil and 0.5% of average investment comes to ₹ 17,70,837/-. The Ld. AR further submitted that the disallowance made by the AO should be deleted. The Ld. AR relied upon the judgment in case of CIT Vs. Taikisha Engineering India Ltd. 54 Taxman.com 109 passed by the Hon ble Delhi High Court. 7. We have heard both the parties and perused the material available on record. The Ld. AR has demonstrated through documents submitted before the Assessing Officer that the municipal tax was paid by the assessee which is through the bank account of the assessee paid through its proprietor firm only. Therefore, Ground No. 2 is allowed. As related to addition of ₹ 17,70,837/-, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
