{"id":4939,"date":"2012-05-17T19:19:11","date_gmt":"2012-05-17T19:19:11","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=4939"},"modified":"2012-05-17T19:19:11","modified_gmt":"2012-05-17T19:19:11","slug":"acit-vs-sil-investment-ltd-itat-delhi-s-14a-onus-is-on-ao-to-show-expenditure-is-incurred-to-earn-tax-free-income","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/acit-vs-sil-investment-ltd-itat-delhi-s-14a-onus-is-on-ao-to-show-expenditure-is-incurred-to-earn-tax-free-income\/","title":{"rendered":"ACIT vs. SIL Investment Ltd (ITAT Delhi)"},"content":{"rendered":"\n\n
Click here to download the judgement (sil_14A_onus_nexus_department.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nS. 14A: Onus is on AO to show expenditure is incurred to earn tax-free income
\n<\/strong><\/p>\n

For AY 2006-07, the assessee earned dividend of Rs. 17 lakhs and LTCG of Rs. 12 crores. The assessee claimed that it had incurred no expense to earn the tax-free income and so no s. 14A disallowance was permissible. However, the AO disallowed Rs. 2 crores under Rule 8D towards interest and admin expenditure. The CIT (A) accepted that no interest was incurred and deleted that disallowance. He also reduced the admin expenditure disallowance. On appeal to the Tribunal, HELD:<\/p>\n

(i) The contention of the Revenue that some expenditure, directly or indirectly, is always incurred for earning tax-free income cannot be accepted. The burden is on the AO to establish the nexus of the expenditure incurred with the earning of exempt income<\/strong> before making any disallowance u\/s 14A (Hero Cycles<\/a><\/strong> 323 ITR 518 (P&H), Jindal Photo<\/a><\/strong> followed)<\/p>\n

(ii) As regards interest, the AO has to show the nexus<\/strong> between the borrowed funds and the tax free investments. If that is not done, disallowance of interest is not permissible (K. Raheja Corporation<\/a><\/strong> (Bom) followed)<\/p>\n

(iii) As regards admin expenses, s. 14A disallowance cannot be made on an ad-hoc basis<\/strong>. It is the department\u2019s responsibility<\/strong> to bring material on record to show that expenditure was incurred<\/strong> for earning the exempt income. If this is not done, disallowance is not permissible (Wimco Seedlings<\/strong> followed)<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The contention of the Revenue that some expenditure, directly or indirectly, is always incurred for earning tax-free income cannot be accepted. The burden is on the AO to establish the nexus of the expenditure incurred with the earning of exempt income<\/strong> before making any disallowance u\/s 14A (Hero Cycles<\/a><\/strong> 323 ITR 518 (P&H), Jindal Photo<\/a><\/strong> followed)<\/p>\n

Read more ›<\/a><\/div>\n

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