INCOME TAX ACT, 1961

Section 14A(2)

Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Non-recording of satisfaction by AO

Assessee earned tax free dividend income on investments in shares and claimed suo moto disallowance under section 14A. However, AO invoked rule 8D and worked out additional disallowance. Assessee challenged this on the ground of non-recording of satisfaction by AO. Held: In terms of mandate laid down under section 14A(2), if AO having regard to the accounts of assessee is not satisfied with correctness of claim of assessee in respect of expenditure in relation to income which does not form part of total income under the Act, then AO would determine amount of expenditure incurred in relation to such income. In the instant case, assessee's books of account had been produced before AO and same were examined on test check basis. Accordingly, while re-computing disallowance, AO had not followed section 14A(2) and, therefore, additional disallowance was deleted.

Relied:Maxopp Investment Ltd. v. CIT (2018) 91 taxmann.com 154 (SC) : (2018) 254 Taxman 325 (SC) : (2018) 402 ITR 640 (SC) : (2018) 301 CTR 489 (SC) : 2018 TaxPub(DT) 1403 (SC)Distinguished:Indiabulls Financial Services Ltd. v. DCIT (2016) 76 taxmann.com 268 (Delhi) : (2017) 395 ITR 242 (Delhi-HC) : 2016 TaxPub(DT) 5087 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 32(1)

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