Nexus between exempted income and expenses on that income must be established to disallow

Last updated: 26 September 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in upholding the disallowance of `.2,073,610/-, being 25% of the dividend income, made by the AO under section 14A of the Act, without establishing any real nexus between the dividend income earned and the expenses allegedly incurred by the appellant for earning such dividend income; On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in not appreciating that the entire dividend income has been derived by the appellant from the investments made by it in the debt-oriented schemes of the mutual funds, as stipulated in the guidelines issued to it by its holding company and therefore, no management cost is allocable towards the earning of the dividend income as per the provisions of section 14A of the Act; On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in observing that the entire investment of the appellant in mutual funds was made pursuant to appellants' own research, analysis and opinion;

Citation :
H.C.L. Comnet Ltd. ,806, Sidhartha, 96, Nehru Place, New Delhi (Appellant) V/s. DCIT,Ci rcle 12(1), New Delhi [PAN: AAACH 9667 H](Respondent)