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TMI Blog2018 (1) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... A read with Rule 8D without recording any satisfaction that the expenses had any nexus with earning of the exempt income of Rs. 53,968/ - or the claim of the assessee was incorrect and when the assessee had suo-motto made the disallowance of Rs. 35,440/-. 3. For that the Ld. CI.T(A) erred in confirming the action of the AO in making disallowance U / s. 14A when the capital and reserves of the assessee were more than the investment in shares and even otherwise , the disallowance cannot exceed the exempt income earned. " 4. The facts as far as ground nos. 2 and 3 are that the assessee which is in the business of growing and manufacturing of tea earned exempt income of Rs. 53,968/- during the relevant previous year. The AO applying the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lyd. In ITA Nos.486/2014 and 299/2014 judgment dated 5th September, 2014. The relevant portion of the judgment is reproduced herein below :- "On the issue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant- Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income exempt under Section 10 in a particular assessment year,, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee are thus partly allowed. 7. Ground No.4 raised by the assessee reads as follows :- 4. For that the Ld. CI.T(A) erred in confirming the action of the AO in disallowing Rs. 23,52,246/- being 10% of repairing expenses on estimate basis when the expense§ were fully vouched and verifiable , were reasonable and fully incurred for business purposes and evidence whereof was produced before the AO. 8. The AO disallowed 10% of the repairs and maintenance claimed by the assessee as deduction in computing the total income on the ground that the assessee could not produce the related bills and vouchers. The CIT(A) confirmed the order of the AO. Before me the prayer of the ld. Counsel for the assessee was that the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly connected with the business of growing and manufacture by the assessee and therefore it has to be considered as part of the composite income on which Rule 8 should be applied. In this regard it is also noticed by me that the insurance premium was paid when the policy was in force was allowed as deduction while computing the composite income. Therefore the nexus with the business of the assessee has been accepted by the revenue in the past. Therefore the surrendered value of keyman insurance policy received during the previous year had also to be considered as part of the composite income on which Rule 8 has to be applied. I hold accordigly and allow ground no.5 raised by the assessee. 13. In the result the appeal by the assessee is part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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