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| The Tax Publishers2020 TaxPub(DT) 4580 (Del-Trib) INCOME TAX ACT, 1961
Section 14A(2)
Where AO in terms of section 14A(2) failed to record his dissatisfaction as to the correctness of claim with regard to accounts of assessee, disallowance was deleted.
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Disallowance under section 14A - Expenditure against exempt income - Disallowance on estimate basis without recording dissatisfaction under section 14A(2) -
AO disallowed Rs. 81 lakhs on account of expenses incurred on earning foreign currency syndicated term loan which was tax free. Further, AO disallowed Rs. 16,60,80 out of dividend income earned of Rs. 17,66,55. CIT(A) confirmed addition to the extent of Rs. 50,000 on estimate basis. Held: AO disallowed the amount invoking the provisions of section 14A. While there was no dispute regarding disallowance of expenditure incurred in relation to exempt income, the Act prescribes proper procedure of computing such disallowance under section 14A(2). AO had not followed procedure as specified under said section wherein AO has to record his dissatisfaction as to the correctness of claim with regard to accounts of assessee. Owing to the procedural tumble, disallowance was deleted.
Followed:Walfort Shares and Stock Brokers (P) Ltd. 326 ITR 1 (SC) : 2010 TaxPub(DT) 2087 (SC)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2001-02
INCOME TAX ACT, 1961
Section 37(1)
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