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TMI Blog2021 (3) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... s not dependent on the exempt income earned during the year? 2. Whether on the facts & circumstances of case, the ld. CIT(A) is correct in deleting the disallowance of expenses claimed against lease rent of Rs. 2,15,51,400/-." Disallowance u/s. 14A: 3. On the facts of the case, the ld. CIT(A) deleted the addition made by the AO u/s. 14A of the Income Tax Act, 1961 on the grounds that the assessee has earned tax free dividend income of Rs. 61,650/- only and the company had sufficient own funds to invest. The revenue filed appeal on the grounds that the disallowance u/s. 14A is not dependent on the exempt income. 4. While making the disallowance, the AO held as under: On going through the simple and plain language, it is abundantly cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Court has held that even if the appellant had borrowed funds during the year, but otherwise had sufficient interest free funds available to meet, investment it can be presumed that investment were made from interest free funds........ 6. There must be actual incurring of expenditure and the expenditure must have clear relationship with exempt income. Section 14A cannot be invoked to disallow expenditure on the basis of assumption. 7. Where the assessee claims that no part of expenditure was incurred or points out and certain expenditure on having been incurred in relation to income which does not form part of total income, the Assessing Officer has to, before making any disallowance u/s. 14A of the Act, record his satisfaction giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue. The Assessing Officer has not brought out any new facts or circumstantial to justify the change in opinion regarding head of income. Therefore, disallowance made by the AO in the impugned order is deleted.
10. Having gone through the rationale given by the Assessing Officer which is not the correct position of the law, the order of the ld. CIT(A) giving relief based on the stand of the revenue for the earlier years and on going through the provisions of Section 71, we hold that such change of head of income is an infructuous academic exercise and accordingly the appeal filed by the revenue is hereby dismissed.
11. In the result, the appeal of the revenue dismissed.
Order Pronounced in the Open Court on 05/03/2021. X X X X Extracts X X X X X X X X Extracts X X X X
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