M/s. Coated Fabrics Pvt. Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 1151/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2893 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HINTENDRA NINAWE
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 14A

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1151/PN/2014 '% % / ASSESSMENT YEAR : 2007-08 M/S. COATED FABRICS PVT. LTD., (NOW AMALGAMATED WITH ORBIT ELECTRICALS PVT. LTD., HARMONY COMPLEX, 5, ICS COLONY, GANESHKHIND ROAD, PUNE 411 007 PAN NO.AAACC7011N . / APPELLANT V/S ACIT, CIRCLE-1(1), PUNE . / RESPONDENT / ASSESSEE BY : SHRI NIKHIL PATHAK / DEPARTMENT BY : SHRI HINTENDRA NINAWE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 29-11-2013 OF THE CIT(A)-I, PUNE RELATING TO ASSES SMENT YEAR 2007-08. 2. DISALLOWANCE OF RS.4,77,740/- U/S.14A BY THE AO AND UPHE LD BY THE CIT(A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN TH E GROUNDS OF APPEAL. / DATE OF HEARING :29.12.2015 / DATE OF PRONOUNCEMENT:08.01.2016 2 ITA NO.1151/PN/2014 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT AND TRADING IN SHA RES. IT FILED ITS RETURN OF INCOME ON 28-10-2007 DECLARING LOSS OF RS.14, 34,649/-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOT ED THAT THE ASSESSEE HAD EXEMPT INCOME U/S.10(34) AMOUNTING TO RS.2,32,09,107/- ON ACCOUNT OF TAX FREE DIVIDEND AND RS.1,40,000/- ON ACCOUNT OF DIVIDEND RECEIVED OUT OF SHARE TRADING AGGREGA TING TO RS.2,33,49,307/-. HOWEVER, THE ASSESSEE HAS NOT ATTRIBUT ED ANY EXPENDITURE TOWARDS EARNING OF SUCH EXEMPT INCOME AND D ISALLOWED IT U/S.14A OF THE I.T. ACT. THE AO, THEREFORE, ASKED THE ASS ESSEE AS TO WHY CORRESPONDING EXPENSES ATTRIBUTABLE TO SUCH INCOME SHOULD NOT BE MADE UNDER THE PROVISIONS OF SECTION 14A OF THE I.T. A CT. IT WAS SUBMITTED BY THE ASSESSEE THAT NO EXPENDITURE WAS DIRE CTLY INCURRED FOR EARNING THE EXEMPT INCOME AND THEREFORE NO DISALLOWANC E U/S.14A WAS TO BE MADE. IT WAS SUBMITTED THAT THE PROVISIONS O F SUB-SECTION (2) AND (3) OF SECTION 14A AND PROVISIONS OF RULE 8D WERE APP LICABLE ONLY W.E.F. A.Y. 2008-09 ONWARDS. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. ACCORDING TO THE AO IT WAS DIFFICULT TO ASSUME THAT THE ASSESSEE COULD NOT HAVE INCURRED ANY EXPENDITURE IN EARNING THE EXEMPT INCOME AND THEREFORE DISALLOWANCE OF CORRESPONDING EXPENDITURE NEEDED TO BE MADE U/S.14A. RELYING ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE DAGA CAPITA L MANAGEMENT PVT. LTD. AND OTHERS THE AO HELD THAT RULE 8D HAS RETROSPECTIVE EFFECT AND THEREFORE SUCH DISALLOWANCE HAS TO BE MADE IN TERMS OF RULE 8D. THE AO ACCORDINGLY QUANTIFIED THE DISALLOW ANCE UNDER SUB RULE (III) OF RULE 8D AT RS.4,77,740/- BEING 0.5% OF THE 3 ITA NO.1151/PN/2014 AVERAGE VALUE OF INVESTMENTS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A) THE ASSESSEE, RELYING ON THE DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO .LTD. VS. DCIT REPORTED IN 328 ITR 81 SUBMITTED THAT RULE 8D WAS APPLICABLE W.E.F. A.Y. 2008-09 ONLY AND THE SAME IS NOT APPLICABLE FOR TH E IMPUGNED ASSESSMENT YEAR. IT WAS FURTHER SUBMITTED THA T THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING T HE EXEMPT INCOME. IT WAS SUBMITTED THAT OUT OF THE TOTAL TAX FREE DIVIDEND OF RE.2,33,49,307/- RECEIVED BY THE ASSESSEE, AN AMOUNT OF RS.2,32,09,107/- HAS BEEN RECEIVED FROM 3 GROUP COMPANIES , NAMELY FINOLEX CABLES LTD., FINOLEX INDUSTRIES LTD AND FINOLEX PLASS ON INDUSTRIES LTD., SHARES OF WHICH WERE HELD AS PROMOTERS HOLDING. IT WAS STATED THAT THE SHARES ARE HELD AS LONG TERM INVE STMENTS AND THE DIVIDEND ON THEM WAS DIRECTLY CREDITED TO THE ASSESSEE S BANK ACCOUNT BEING ONLY CREDIT PER COMPANY DURING THE WHOLE YEAR AND NO EXPENDITURE WHATSOEVER HAS BEEN INCURRED TO EARN THIS DIVIDEND INCOME. IT WAS FURTHER SUBMITTED THAT THE REMAINING PORT ION OF THE DIVIDEND INCOME OF RS.1,40,200/- CLAIMED AS EXEMPT WAS EARNE D ON SHARES HELD FOR TRADING IS MERELY INCIDENTAL TO THE ACTIVITY OF SHARE TRADING AND NO EXPENDITURE WAS INCURRED TO EARN THE SA ID DIVIDEND. IT WAS ARGUED THAT NO DIRECT EXPENSES WAS ALSO INCURRED IN EARNING SUCH EXEMPT INCOME AND NO BORROWED CAPITAL WAS DEPLOYED TO M AKE THE CORRESPONDING INVESTMENTS. THIS IS EVIDENT FROM THE FACT THAT THE AO HAD NOT QUANTIFIED ANY AMOUNT UNDER SUB-RULE (I) OF RULE 8D WHILE MAKING THE DISALLOWANCE. IT WAS FURTHER SUBMITTED THAT TH E AO HAS NOT ESTABLISHED THAT THERE WAS ANY NEXUS BETWEEN THE INVESTMENTS MADE TO EARN THE EXEMPTED INCOME AND THE EXPENDITURE CLAIMED OR AN Y 4 ITA NO.1151/PN/2014 SPECIFIC INSTANCES OF ANY SUCH EXPENDITURE. THE AO HAS ON LY MERELY OBSERVED THAT IT IS DIFFICULT TO ASSUME THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE IN EARNING THE TAX FREE DIVIDEND INCOME. IT WAS SUBMITTED THAT IN ABSENCE OF SUCH OBSERVATION BY TH E AO DISALLOWANCE U/S.14A COULD NOT BE MADE MERELY ON THE BA SIS OF PRESUMPTIONS. RELYING ON VARIOUS DECISIONS THE ASSESSEE ARGUED THAT DISALLOWANCE U/S.14A CANNOT BE MADE MERELY ON THE BASIS OF PRESUMPTION THAT SOME EXPENDITURE MIGHT HAVE BEEN INCUR RED FOR EARNING THE EXEMPT INCOME AND FOR MAKING THE DISALLOWANCE U/S.14A THE AO MUST ESTABLISH THE NEXUS BETWEEN THE EXEMPT IN COME AND EXPENSES INCURRED FOR EARNING THE SAME AND NO DISALLOWANC E CAN BE MADE IN THE ABSENCE OF ANY SUCH PROOF. 6. THE ASSESSEE FURTHER SUBMITTED THAT NO DISALLOWANCE C OULD BE MADE U/S.14A IN RESPECT OF DIVIDEND RECEIVED ON SHARES HE LD FOR TRADING ON THE GROUND THAT THE GAIN EARNED IS OFFERED TO TAX AND EARNING OF DIVIDEND IS NOT THE MAIN INTENTION. RELYING ON TH E DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF APOORVA PATNI VS. ADDL.CIT REPORTED IN 24 TAXMANN.COM 223 IT WAS SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT NO DISALLOWANCE U/S.14A CAN BE MADE WHEN THE SHARES ARE HELD FOR TRADING PURPO SES. IT WAS FURTHER ARGUED THAT NO DISALLOWANCE WAS MADE BY THE AO U/S.14A UNDER SIMILAR FACTUAL POSITION IN A.YRS. 2005-06 AND 2006-07 WHERE SCRUTINY ASSESSMENTS HAVE BEEN MADE AND THEREFORE THE RE WAS NO REASON FOR THE AO TO ADOPT DIFFERENT VIEW IN THIS YEAR. RE LYING ON VARIOUS DECISIONS IT WAS ARGUED THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE DEPARTMENT TO TAKE A DIFFERENT VIEW , VIS--VIS THE VIEW TAKEN IN THE EARLIER YEARS, THE SAME POSITION SHOULD B E CONTINUED IN THE SUBSEQUENT YEAR. WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS, IT 5 ITA NO.1151/PN/2014 WAS SUBMITTED THAT THE ENTIRE DISALLOWANCE U/S.14A IS UNJU STIFIED SINCE THE DISALLOWANCE MADE U/S.14A IS VERY HIGH IN VIEW OF T HE FACTS OF THE CASE AND THE NATURE OF INCOME EARNED BY THE ASS ESSEE AND THEREFORE THE SAME MAY BE RESTRICTED TO A REASONABLE AMOUNT. 7. HOWEVER, THE CIT(A) WAS NOT FULLY SATISFIED WITH THE EXP LANATION GIVEN BY THE ASSESSEE. WHILE HE HELD THAT THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE TO A.Y. 2007-08, HOWEVER, HE HELD THAT T HE AO IS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14A AND THE D ISALLOWANCE OF RS.4,77,740/- OUT OF TOTAL COMMON EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT OF RS.12,82,011/- IS MORE THAN REASONABLE. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A). REFERRING TO THE COPY OF AUDITED PROFIT AND LO SS ACCOUNT FOR THE YEAR ENDING 31-03-207, A COPY OF WHICH IS PLACED AT PAGE 13 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE PROFIT FROM SHARE TRADING AND FINANCING BUSINESS AT RS.15,19,244/-. SIMILARLY, HE DREW THE ATTENTION OF THE BENCH TO THE DIVIDEND RECEIVED ON RS.2,32,09,107/- FOR THE YEAR ENDING 31-30-2007. REFERRING TO SCHEDULE 8 OF THE AUDITED ACCOUNTS, A COPY OF WHICH IS PLAC ED AT PAGE 20 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENC H TO THE DIVIDEND INCOME OF RS.1,40,200/- WHICH HAS BEEN RECEIVED ON SHARES HELD AS STOCK IN TRADE. REFERRING TO PAGE 16 OF THE PAPE R BOOK HE DREW THE ATTENTION OF THE BENCH TO THE INVESTMENTS HELD BY T HE COMPANY ACCORDING TO WHICH THE TOTAL INVESTMENT DURING THE YEAR WAS RS.11.69 CRORES AS AGAINST RS.11.47 IN THE PRECEDING ASSESSMENT Y EAR. HE SUBMITTED THAT NO DISALLOWANCE U/S.14A HAS BEEN MADE BY THE AO IN 6 ITA NO.1151/PN/2014 THE PRECEDING ASSESSMENT YEARS. AS MENTIONED EARLIER TH E PROVISIONS OF RULE 8D ARE NOT APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. REFERRING TO PAGE 37 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESS EE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING CHART A ND SUBMITTED THAT IN THE ASSESSMENTS COMPLETED U/S.143(3) NO DISALLOWANC E U/S.14A HAS BEEN MADE DURING THE A.YRS. 2005-06 AND 2006-07 : ASST. YEAR DIVIDEND FROM SHARES HELD AS INVESTMENT (RS.) DIVIDEND FROM SHARES HELD FOR TRADING (RS.) TOTAL EXEMPT DIVIDEND (RS.) 2005 - 06 1,54,72,738 13,25,350 1,67,98,088 2006 - 07 2,16,00,048 1,450 2,16,01,498 2007 - 08 2,32,09,107 1,40,200 2,33,49,307 10. REFERRING TO THE SUBMISSIONS TO BE MADE BEFORE THE C IT(A), A COPY OF WHICH IS PLACED AT PAGES 38 TO 42 OF THE PAPER B OOK, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS CATEGORIC ALLY SUBMITTED BEFORE THE CIT(A) THAT OUT OF THE TOTAL DIVIDEND INCOME OF RS.2,33,49,307/- AN AMOUNT OF RS.2,32,08,107/- HAS BEEN REC EIVED FROM THE 3 GROUP COMPANIES AND THE BALANCE AMOUNT OF RS.1,40,200/- HAS BEEN EARNED ON SHARES HELD FOR TRADING ACTIVITIES. RE FERRING TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL (THIRD MEMBER) IN THE CASE OF WIMCO SEEDLINGS LTD. VS. DCIT REPORTED IN 107 ITD 267 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD T HAT U/S.14A ONLY EXPENDITURE WHICH HAS BEEN PROVED TO HAVE BEEN IN CURRED IN RELATION TO THE EARNINGS OF TAX FREE INCOME CAN BE DISALLOWE D AND THE SECTION CANNOT BE EXTENDED TO DISALLOW EVEN EXPENDITURE WHICH IS ASSUMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNIN G TAX FREE INCOME. IT HAS FURTHER BEEN HELD IN THE SAID DECISION THAT COMMON EXPENDITURE INCURRED ON THE HEAD OFFICE ETC. CANNOT BE B ROKEN UP ARTIFICIALLY TO ATTRIBUTE OR APPORTION A PART THEREOF TO TH E EARNING OF THE 7 ITA NO.1151/PN/2014 TAX FREE INCOME ON THE ASSUMPTION THAT SUCH PART OF TH E COMMON EXPENDITURE WAS INCURRED IN RELATION TO THE TAX FREE INCOME. 11. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TR IBUNAL IN THE CASE OF SWATI PROFIES PVT. LTD. VS. ACIT VIDE ITA NO.730 /PN/2006 ORDER DATED 31-12-2007 FOR A.Y. 2003-04 HE SUBMITTED TH AT THE TRIBUNAL FOLLOWING THE DECISION OF THE TRIBUNAL (THIRD MEMBER) IN THE CASE OF WIMCO SEEDLINGS LTD. HAS DELETED THE DISALLOWANCE MA DE BY THE AO ON PRESUMPTIONS WHICH WAS UPHELD BY THE CIT(A). THE T RIBUNAL HELD THAT THE APPROACH OF THE AO CANNOT BE PROVED ESP ECIALLY WHEN HE HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE EXPENDITURE AND THE EXEMPT INCOME. HE ALSO RELIED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF APOORVA PATNI VS. ADDL.CIT REPO RTED IN 24 TAXMANN.COM. 223. HE ACCORDINGLY SUBMITTED THAT NO DIS ALLOWANCE U/S.14A IS CALLED FOR IN THE INSTANT CASE. 12. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO PARA 5.5 OF THE ORDER OF THE CIT(A) THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) HAS GIVEN A FINDING ON THE BASIS OF THE FINANCIALS OF TH E ASSESSEE COMPANY THAT THE ASSESSEE HAS FILED ONE COMMON PROFIT AN D LOSS ACCOUNT FOR ALL THE ACTIVITIES OF THE ASSESSEE AND THE EXP ENSES INCURRED FOR ALL THE ACTIVITIES ARE DEBITED TO THE COMMON PROFIT AND LOSS ACCOUNT. THEREFORE, THE SUBMISSION OF THE ASSESSEE THAT THERE WAS NO DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EXPENDITURE INCURR ED AND EXEMPTED INCOME AND THEREFORE THERE CANNOT BE ANY DISA LLOWANCE OUT OF GENERAL EXPENSES IS NOT TENABLE PARTICULARLY WHEN THE MAJOR CONSTITUENT OF THE INCOME OF THE ASSESSEE IS DIVIDEND. HE SUBMITTED THAT HAVING REGARD TO THE COMPOSITE BUSINESS AND COMMO N PROFIT AND LOSS ACCOUNT AND OTHER FINANCIAL STATEMENTS THE AO WAS F ULLY JUSTIFIED 8 ITA NO.1151/PN/2014 IN DISALLOWING AN AMOUNT OF RS.4,77,740/- AND THE CIT(A) WAS FU LLY JUSTIFIED IN UPHOLDING SUCH ADDITION. HE ACCORDINGLY SUBMITT ED THAT THE ORDER OF THE CIT(A) BE UPHELD. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SI DES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE AO APPL YING THE PROVISIONS OF SECTION 14A R.W. RULE 8D DISALLOWED AN AMOUNT OF RS.4,77,740/-. WE FIND THE LD.CIT(A) HELD THAT PROVISIONS OF RU LE 8D ARE NOT APPLICABLE TO THE ASSESSEE FOR THE IMPUGNED ASSE SSMENT YEAR AND IS APPLICABLE FROM A.Y. 2008-09 ONWARDS. HOWEVER, HE H ELD THAT THE PROVISIONS OF SECTION 14A ARE CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE ASSESSEE HAS PREPARED ONLY ON E COMMON PROFIT AND LOSS ACCOUNT FOR ALL THE ACTIVITIES AND THE EXPENSES IN CURRED FOR ALL THE ACTIVITIES ARE DEBITED TO THE COMMON PROFIT AND LOSS A CCOUNT, THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EXPENDITURE INCURRED AN D EXEMPTED INCOME. IT IS THE SUBMISSION OF THE LD. COUNSEL FO R THE ASSESSEE THAT UNDER IDENTICAL CIRCUMSTANCES THERE WAS N O DISALLOWANCE U/S.14A DURING A.YRS. 2005-06 AND 2006-07. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT O UT OF THE TOTAL TAX FREE DIVIDEND OF RS.2,33,49,307/- AN AMOUNT OF RS.2,32,09,107/- HAS BEEN RECEIVED FROM 3 GROUP COMPANIES , NAMELY FINOLEX CABLES LTD., FINOLEX INDUSTRIES LTD., AND FINOLEX PLASS ON INDUSTRIES LTD. THE BALANCE AMOUNT OF RS.1,40,200/- HAS B EEN EARNED AS DIVIDEND ON SHARES HELD FOR TRADING ACTIVITIES. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSES SEE HAS ACTUALLY 9 ITA NO.1151/PN/2014 INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME. THE AO HAS NOT POINTED OUT ANY SPECIFIC INSTANCES OUT OF RS.12.82 LAKHS WHICH IS DIRECTLY RELATABLE TO EARNING OF DIVIDEND. 14. WE FIND SOME FORCE IN THE ABOVE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE DELHI BENCH OF THE TRIBUNAL (THIRD MEMBER) IN THE CASE OF WIMCO SEEDLINGS LTD. (SUPRA) HAS CATE GORICALLY HELD THAT U/S.14A ONLY THE EXPENDITURE WHICH HAS BEEN P ROVED TO HAVE BEEN INCURRED IN RELATION TO THE EARNING OF TAX FREE INCOME CAN BE DISALLOWED AND THE SECTION CANNOT BE EXTENDED TO DISALLOW EVEN EXPENDITURE WHICH IS ASSUMED TO HAVE BEEN INCURRED FOR T HE PURPOSE OF EARNING THE TAX FREE INCOME. IT HAS FURTHER BEEN HELD THAT COMMON EXPENDITURE AT THE HEAD OFFICE ETC. CANNOT BE BROKEN UP ARTIFICIALLY TO ATTRIBUTE OR APPORTION A PART THEREOF TO THE EARNING O F THE TAX FREE INCOME ON THE ASSUMPTION THAT SUCH PART OF THE COMMON EXPENDITURE WAS INCURRED IN RELATION TO THE TAX FREE DIVIDEND INCOME. H OWEVER, IT IS ALSO A FACT THAT NO SEPARATE BOOKS OF ACCOUNT ARE MAIN TAINED FOR TAXABLE INCOME AND EXEMPT INCOME. THE ASSESSEE HAS PREP ARED ONE COMMON PROFIT AND LOSS ACCOUNT. THEREFORE, IT CANNOT BE SAID THAT NO EXPENDITURE HAS BEEN INCURRED AT ALL FOR EARNING THE EXEM PT INCOME. HOWEVER, CONSIDERING THE FACT THAT OUT OF TOTAL DIVIDEND IN COME OF RS.2.34 CRORES AN AMOUNT OF RS.2.32 CRORES ARE RECEIVED FR OM 3 GROUP COMPANIES AND AN AMOUNT OF RS.1.40 LAKH HAS BEEN EARNED ON SHARES HELD FOR TRADING ACTIVITIES, DISALLOWANCE OF RS.4,77,740/- APPEA RS TO BE ON THE HIGHER SIDE. VARIOUS BENCHES OF THE TRIBUNAL ARE T AKING THE VIEW THAT SOME EXPENDITURE ON ACCOUNT OF ADMINISTRATIVE E XPENSES HAS TO BE DISALLOWED ON REASONABLE ESTIMATE BASIS UNDER SUCH CIRCUMSTANCES. CONSIDERING THE TOTALITY OF THE FACTS OF TH E CASE, DISALLOWANCE OF RS.50,000/- ON ESTIMATE BASIS UNDER THE FACT S AND 10 ITA NO.1151/PN/2014 CIRCUMSTANCES OF THE CASE IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY TH E ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-01-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 08 TH JANUARY 2016. LRH'K ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT (A) - I , PUNE 4. 5. 6. CIT-I, PUNE ' *, *, IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , ' //TRUE COPY// / * / SR. PRIVATE SECRETARY *, IQ.KS / ITAT, PUNE