TRAVANCORE TEXTILES P LTD.,CHENNAI vs. ITO, CHENNAI

The only grievance in this appeal is with regard to sustaining the disallowance of expenses amounting to ₹7,37,749/- as against the total claim of ₹11,81,998/- in proportion to the agricultural income reported and the interest income claimed in the computation of taxable total income without assigning proper reasons and justification.

The facts of the case are that the Assessing Officer found that the assessee’s income mainly consists of agricultural income, interest income and profit on sale of investment. No textile business has been carried out during the year. The AO observed that the assessee deducted all the expenses directly attributable to agricultural activities from gross agricultural receipts whereas all other remaining expenses have been deducted from the interest income, which in turn, reduced the taxable income. According to the AO, in the absence of any other business other than interest income and agricultural activity, all other common expenses have to be deducted proportionately from agricultural income and other taxable income and show cause notice was issued to the assessee, as to why 5/8th of the expenses should not be disallowed. The - - 3 ITA 483/Mds/17

Before the CIT(Appeals), the ld. AR, filed the assessee’s financial details but no written submission was submitted in support of the assessee’s claim. While, the assessee has claimed exemption u/s.10 of the Act towards agricultural income and u/s.10(38) of the Act towards profit on sale of investment and the assessee has claimed the entire expenditure against the interest income, as pointed out by the AO. As per sec.14A of the Act, expenditure relatable to the income exempt from taxation should be disallowed which the assessee has failed to do so.