IMPULSE INDIA P LTD Vs. ASSTT CIT OSD
LAWS(IT)-2008-3-11
INCOME TAX APPELLATE TRIBUNAL
Decided on March 20,2008

Appellant
VERSUS
Respondents

JUDGEMENT

R.C. Sharma, A.M. - (1.) BOTH the appeals filed by the assessee are against the orders of Commissioner (Appeals)-XIV, New Delhi dated 1 -8-2005 and 22-3-2005 for the assessment years 2002-03 and 2001-02 respectively, in the matter of order passed under Section 143(3) of the Income Tax Act, 1961, wherein following grounds of appeals have been taken: Grounds taken in ITA No. 3889/Del/05: That the learned Commissioner (Appeals) XIV, New Delhi has wrongly upheld the decision of ACIT(OSD), Ward 1(3), New Delhi for disallowing a sum of Rs. 7,67,706 out of personnel and administration expenses under Section 14A of the Income Tax Act on an ad hoc and arbitrary basis on the assumption that these expenses were incurred for earning dividend income claimed to be exempt under the Income Tax Act. That the assessee prays for the leave to add, amend or vary the above grounds of appeal before or at the time of hearing. Grounds taken in ITA No. 2227/Del/05: That the learned Commissioner (Appeals) XIV, New Delhi has wrongly upheld the decision of Deputy Commissioner, Circle 11(1), New Delhi for disallowing a sum of Rs. 4,05,275 out of personnel and administration expenses under Section 14A of the Income Tax Act on an ad hoc and arbitrary basis on the assumption that these expenses were incurred for earning dividend income claimed to be exempt under the Income Tax Act. That the assessee prays for leave to add, amend or vary the above grounds of appeal before or at the time of hearing.
(2.) Rival contentions have been heard and record perused. As common issues are involved in both the years, both the appeals have been heard together and are now decided by this consolidated order. The grievance of the assessee in both the years relates to disallowance of personal and administrative expenses by invoking the provisions of Section 14A on an ad hoc and arbitrary basis, on the assumption that these expenses were incurred for earning dividend income claimed to be exempted under Income Tax Act. It was contended by the learned Authorised Representative that assessee has not incurred any expenditure on earning of exempted income, i.e., dividend income, and the assessing officer without pin pointing the specific expenses has disallowed on ad hoc basis proportion of expenses otherwise incurred for the purpose of business. He relied on the decision of the ITAT in case of Maruti Udyog Ltd. v. Dy. CIT (2005) 92 ITD 119 (Del) & Wimco Seedling Ltd. v. Dy. CIT (2007) 107 ITD 267 (Del) (TM) in support of the proposition that assessing officer has no authority to make ad hoc disallowance.
(3.) ON the other hand, learned Departmental Representative relied on the orders of lower authorities and contended that certain disallowance of common expenses in imperative which might have been incurred for earning the exempted income.;


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