When Rule 8D is not applicable the provision of sec 14A is to be followed and AO is duty bound to determine the expenses related to particular income

Last updated: 11 January 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Briefly stated facts of the case are that the assessee company is engaged in the business of Trading in Electric Motors, Fans, Laboratory equipments and generation of Wind Power filed return declaring total income at Rs.11,60,151/-. During the course of assessment proceedings, it was interalia observed by the AO that the assessee has claimed dividend income of Rs.12,840/- being exempt u/s 10(34) of the Income Tax Act, 1961(in short the Act). On being asked to give details of expenses incurred for earning exempt income and as to why the expenses incurred and claimed in respect of exempt income should not be disallowed, the assessee stated that no expenses were incurred to earn the dividend income. However, the AO did not accept the assessee’s explanation. The AO after invoking the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 added a sum of Rs.1,26,440/- to the total income of the assessee as per working given at page 3 of the assessment order and accordingly completed the assessment at a book profit u/s 115JB at Rs.1,37,31,103/- vide order dated 24.12.2008 passed u/s 143(3) of the Act. On appeal, the ld. CIT(A) while agreeing with the views of the AO and relying on the decision of the Special Bench of Tribunal in Daga Capital Management Pvt. Ltd. (117 ITD 169) (Mum)(SB) confirmed the disallowance made by the AO.

Citation :
Remi Sales And Engineering Ltd. APPELLANT V/s Addl . Commissioner of Income Tax RESPONDENT