Expenditure on exempted income cannot allowed but it can disallowed only to the extent claim by the assessee

Last updated: 28 March 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
At the time of hearing before us, it is stated by the learned counsel for the assessee that there are various factual errors in computing the disallowance as per Rule 8D. However, he is not arguing in detail with regard to those errors but, his argument is limited to the fact that the disallowance cannot exceed the expenditure claimed by the assessee. He stated that total expenditure claimed by the assessee in the profit & loss account is only Rs.49,04,028/- while the Assessing Officer disallowed Rs.2,37,59,757/-. That apart from dividend income, the assessee has other income to the extent of Rs.97,04,935/-. Therefore, part of the total expenditure incurred by the assessee is certainly attributable to earning of other income. However, even if it is presumed that the entire expenditure was incurred for earning of dividend income, then also, the disallowance cannot be made more than the expenditure actually claimed by the assessee. He stated that Section 14A provides that no deduction shall be allowed in respect of expenditure incurred by the assessee for earning of exempt income. Rule 8D is only a method for determining such expenditure. Therefore, in any case, what has not been claimed by the assessee cannot be disallowed. He stated that the entire expenditure claimed by the assessee was only Rs.49,04,028/- and, therefore, even if it is presumed that the entire expenditure was for earning of dividend income, the disallowance cannot exceed Rs.49,04,028/-

Citation :
M/s Gillette Group India Pvt.Ltd.,(now known as Wella Haircosmetics India Pvt.Ltd.),C/o JaiKumar Tejwani & Co.,Chartered Accountants,B-50, East of Kailash,Top Floor,New Delhi.PAN: AAACG2468D.(Appellant)Vs. Assistant Commissioner of Income Tax,Circle-12(1),New Delhi. (Respondent)