THE INDIA CEMENTS LIMITED,CHENNAI vs. DCIT CORPORATE CIRCLE 2(1) CHENNAI, CHENNAI

Ground No. 1 of the appeal is general in nature which doesn't require any adjudication and is therefore dismissed.

Ground No.2 raised by the assessee relates to the disallowance of ₹1,07,44,451/- made by the AO u/s 14A of the Income Tax Act 1961 (herein after the Act) in terms of Rule 8D of the Income Tax Rules 1962 (herein after the Rules). Briefly stated, the AO had observed from the balance-sheet that the assessee held substantial investments which were capable of yielding tax-free income and therefore, according to him, the expenditure incurred in relation to earning such exempt income was to be disallowed under Section 14A of the Act. The AO inter alia also observed that, the assessee didn't derive any dividend income from these investments, but had claimed profit to the extent of ₹1,07,44,451/- earned from sale of Mutual Funds as exempt u/s.10(39) of the Act. The AO accordingly show caused the assessee to explain as to why expenditure incurred for earning such exempt income should not be disallowed, in accordance with Rule 8D. In response, the assessee explained that, the investments which yielded ex