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| The Tax Publishers2020 TaxPub(DT) 4379 (Del-Trib) INCOME TAX ACT, 1961
Section 14A(2)
Invocation of rule 8D without having regard to assessee's accounts was not in terms of mandate laid down under section 14A(2) and, therefore, disallowance was deleted.
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Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Non-recording of dissatisfaction as to correctness of assessee's claim under section 14A
Assessee earned tax-free dividend income on investments in shares and claimed that no expenses were incurred for earning the exempt income. AO straightway invoked rule 8D and worked out disallowance. Held: AO at the first instance having regard to assessee's accounts should have examined the correctness of the statement made by assessee that no expenses were incurred for earning exempt income during the year and if and only if AO was not satisfied on this account after making reference to accounts, he was entitled to adopt the method under rule 8D. Therefore, invocation of rule 8D was in contravention of mandate laid down in section 14A(2) and, therefore, disallowance was not sustainable.
Followed:CIT v. Taikisha Engineering India Ltd. (2015) 275 CTR (Del.) 316 : 2015 TaxPub(DT) 391 (Del-HC) and Jt. Investments (P) Ltd. v. CIT (2015) 372 ITR 694 (Del.) : (2015) 275 CTR 471 (Del) : 2015 TaxPub(DT) 1375 (Del-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
INCOME TAX ACT, 1961
Section 32(1)
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