TMI Blog2013 (11) TMI 1720X X X X Extracts X X X X X X X X Extracts X X X X ..... x(A) is illegal being against the principles of natural justice ad against the provisions of IT Act, 1961. 2. The ld. Commissioner of Income Tax(A) has grossly erred on facts as well as in law in confirming the disallowance of ₹ 458112/- under Rule 8D read with section 14A of the IT Act. 3. Apropos these grounds, we have heard rival arguments of both the parties and carefully perused the record and paper book filed by the assessee spread over 31 pages. On behalf of the assessee, the ld. assessee s representative has submitted a brief synopsis of submissions and citations relied by the assessee. The ld. AR submitted that the Assessing Officer made disallowance of ₹ 4,58,112/- u/s 14A of the Income Tax Act, 1961 r/w Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits, we find much force in the assessee's argument that share application money', to the extent it is actually so, so that it only represents amounts paid by way of application for allotment of shares, the same cannot be regarded as an investment in shares, or an asset (or asset class) yielding tax-free income, and neither is it capable of yielding any tax-free income. The same would, therefore, in our clear view, have to be excluded in working out the disallowance ulr. 8D. Further, though the Revenue has not disputed the sums reflected as 'share application money' in the assessee's balance-sheet, the AO, to whom the matter is to be in any case restored for working out the disallowance by excluding the same, shall, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for making disallowance u/s 14A of the Act r/w Rules 8D of the Income Tax Rules. 7. Replying to the above, the ld. DR submitted that the Assessing Officer has dealt with the situation where the assessee is carrying on one individual business and the expenditure incurred by the assessee is related to the taxable and tax exempt income. The DR further contended that in such a situation, applying the principle of apportionment of expenditure, the expenditure attributable to the income which is tax exempt has to be allowed. The DR pointed out observations and findings of the Assessing Officer and submitted that since the assessee has stated in his letter that no expenditure has been incurred for earning of tax free income, therefore, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to exempt income, the AO would have to indicate cogent reasons for the same. 9. We also take cognizance of the judgment of ITAT D Bench Mumbai in the case of Rainy Investments Pvt. Ltd. (supra). It has been held that the share application money cannot be regarded as an investment in shares or an asset yielding tax free income and neither it is capable of yielding any tax free income. In the present case, the Assessing Officer has ignored above legal proposition while making disallowance u/s 14A of the Act r/w 8D of the Rules. During the first appellate proceedings, the Commissioner of Income Tax(A) has examined the claim of the assessee but has not considered above legal propositions and ratio of the related judgments. The Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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