The Tax Publishers2020 TaxPub(DT) 3894 (Mad-HC) : (2020) 428 ITR 0470

INCOME TAX ACT, 1961

Section 14A

Straightaway application of rule 8D without considering assessee's case that assessee did not earn tax free income from investments was in contravention of section 14A(2) and, therefore, disallowance was deleted.

Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D without considering assessee's plea as to no exempt income received during the year -

AO noticed investments in shares in assessee's balance-sheet and invoked section 14A read with rule 8D so as to make disallowance. Assessee's case was that section 14A read with rule 8D had no applicability as there was no exempt income received during the year. Held: To apply section 14A AO should have recorded a finding as to how sub-section (1) of section 14A would stand attracted and provisions of rule 8d could not be made applicable in vacuum, i.e., in he absence of exempt income. Therefore, straightaway application of rule 8 without considering assessee's case that assessee did not earn tax free income from investments was in contravention of section 14A(2) and, therefore, disallowance was deleted.

Followed: CIT v. Chettinad Logistics Pvt. Ltd. (2017) 80 Taxmann.com 221 (Mad) : 2017 TaxPub(DT) 1144 (Mad-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12


INCOME TAX ACT, 1961

Section 28

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