Expenditure on income not forming part of taxable income

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Facts, in brief, as per relevant orders are that return declaring loss of ``5,51,91,000/- filed on 29.09.2008 by the assessee, carrying on the business of financing, leasing and investment activities, after being processed on 05.08.2009 u/s 143 (1) of the Income-tax Act, 1961, (hereinafter referred to as the Act), was selected for scrutiny with the service of a notice u/s 143(2) of the Act, issued on 06.08.2009 During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee claimed dividend income of ``10,000/- exempt u/s 10(34) of the Act. In response to a show cause notice vide order sheet entry dated 2.8.2010 by the AO, asking as to why disallowance in terms of provisions u/s 14A of the Act r.w.r. 8D of the I.T. Rules, 1962 be not made, the assessee merely replied that no expenditure was incurred for earning dividend income. However, the assessee worked out disallowance of ``5,42,74,410/- in terms of provisions of section 14A of the Act, under protest. In the light of this reply of the assessee, the AO while relying upon decisions in CIT Vs. United General Trust, 200 ITR 488 (SC); Southern Petro Chemicals Industries (2005), 93 TTJ 161; Harish Krishnakanta Bhatt (2004), 91 ITD 311; S.G. Investments and Industries Ltd. (2004), 89 ITD 44 and Everplus Securities & Finance Ltd. (2006), 285 ITR (AT) 112 disallowed an amount of ``5,45,52,862/- in term of provisions of section 14A of the Act read with rule 8D of the I.T. Rules 1962 ,observing, inter alia, that issue is not only of the expenses incurred for receiving the dividend income but size of the investment and cost incurred on investment and management of huge investments for earning income which did not form part of total income, are also material.

Citation :
Assistant. CIT, Circle 2(1),Room no. 398D,CR Building, IP Estate, New Delhi (Appellant) V/s. M/s Apollo Finance Ltd. ,414/1, DDA Commercial Complex, Distr ict Centre,Janakpur i,New Delhi [PAN: AAACA 5354J] (Respondent)