INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Assessee made suo moto disallowance - AO made further disallowance by invoking rule 8D

Assessee-company made suo moto disallowance under section 14A. However, AO by applying rule 8D, made further disallowance under section 14A. CIT(A) deleted the further disallowance made by AO. Aggrieved, Revenue was in appeal. Assessee submitted that while applying rule 8D, AO had not recorded any dissatisfaction as regards suo moto disallowance made by the assessee, which is sine qua non and therefore, CIT(A) was justified in deleting further disallowance made by AO by applying rule 8D. Held: It is incumbent upon AO to record a satisfaction as to why disallowance offered by assessee under section 14A is not sufficient, which is sine qua non before proceeding to apply rule 8D. Although there is no particular format or manner in which the satisfaction is to be recorded but the same should have been discernible from the order passed by AO. However, in instant case, there was no such dissatisfaction recorded by AO as regards the amount of the disallowance computed by the assessee under section 14A. Hence, CIT(A) was justified in deleting the further disallowance made by AO under section 14A by applying rule 8D.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13 & 2013-14

INCOME TAX ACT, 1961

Section 250

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