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2015 (10) TMI 2757

..... n to dividend is of ₹ 25,36,669/-. Now, this is evidently absurd on the face of it and the assessee is correct in contending that since there is huge other income, the quantum of disallowance is entirely unreasonable. Rather, a reasonable disallowance can be made, if the accounts of the assessee are considered, without taking recourse to Rule 8D of the Rules. As assessee has contended that the total expenses claimed (as above) being ₹ 31,13,082/-, the total income ( as above) being of ₹ 80,189,889/- and out of this income, dividend being of ₹ 904,668/-, the disallowance of expenses needs to be worked out by applying the proportionate method, as per which, the disallowance works out to ₹ 35120/- it is found to b .....

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..... 42,67,498/- u/s 14A of the Income-tax Act, 1961 under Rule 8D(2)(ii) & Rule 80D(2)(iii) of the I.T. Rules, 1962. The ld. CIT(A) deleted the disallowance of ₹ 17,30,834/- made under Rule 8D(2)(ii), holding that there was no direct or indirect expenditure incurred in earning tax free income. 3. However, apropos disallowance of administrative expenditure under Rule 8D(2)(iii) of the I.T. Rules, the ld. CIT(A) maintained the disallowance, holding as follows: 7. I have gone through the issue and the submissions of the appellant. In this case the appellant has made huge investments in tax free investments totaling to ₹ 96,54,43,531/-. Certainly expenditure like clerical expenses, telephone expenses, stamp duty, etc. are incurred b .....

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..... end; that considering the enormous other income, this quantum of disallowance is grossly absurd and unreasonable. It has been contended that under section 14A(2) of the Act, resorting to Rule 8D of the Rules, arises only if the AO is not satisfied with the correctness of the claim of the assessee in respect of expenditure relating to income, which does not form part of the total income under the I.T.Act, having regard to the accounts of the assessee. It has been contended that as is evident from the phraseology specifically employed in the section, if from the accounts of the assessee, a reasonable disallowance could be worked out, there is no need to invoke Rule 8D of the Rules, particularly, if doing so gives an absurd and unreasonable re .....

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..... ncome is of ₹ 9,04,668/- only. Therefore, out of the total expenses claimed of ₹ 31,13,082/-, the amount disallowed in relation to dividend is of ₹ 25,36,669/-. Now, this is evidently absurd on the face of it and the assessee is correct in contending that since there is huge other income, the quantum of disallowance is entirely unreasonable. Rather, a reasonable disallowance can be made, if the accounts of the assessee are considered, without taking recourse to Rule 8D of the Rules. The ld. counsel for the assessee has contended that the total expenses claimed (as above) being ₹ 31,13,082/-, the total income ( as above) being of ₹ 80,189,889/- and out of this income, dividend being of ₹ 904,668/-, the dis .....

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