The Tax Publishers2021 TaxPub(DT) 0057 (Kol-Trib)

INCOLME TAX ACT, 1961

Section 14A

Where AO had not pointed out/identified any specific infirmity in the disallowance so offered by assessee and it was evident from the records particularly the order passed by AO that without recording satisfaction about the correctness of the claim of assessee under section 10(34), AO made quantum of disallowance by invoking the Rule 8D of the IT Rules, 1962, therefore, disallowance made by AO was not sustainable.

Disallowance under section 14A - Expenditure incurred on exempted income - AO computed disallowance at 1% of the average monthly balance of the investment -

Assessee had shown a dividend income claimed as exempt income under section 10(34). The suo motu disallowance computed by assessee in the return of income under section 14. Assessee was directed to file the details of tax-free income earned by the assessee and to explain why provisions of section 14A should not be invoked. In response to that the assessee submitted its reply along with calculation for such suo motu disallowance under section 14A as it also reflects from the order passed by the AO. However, such explanation as rendered by assessee was not found acceptable and considering the CBDT Circular, dated 11-02-2014, disallowance of expenditure under section 14A AO computed the disallowance at 1% of average monthly balance of the investment. Held: While invoking rule 8D of the IT Rules, 1962, AO had not pointed out/identified any specific infirmity in the disallowance so offered by assessee. It is evident from records particularly the order passed by AO that without recording satisfaction about the correctness of the claim of assessee under section 10(34), AO made the quantum of disallowance by invoking rule 8D of the IT Rules, 1962. The accounts of the assessee was examined, in absence of which the order of disallowances and AO was not sustainable.

Followed:National Thermal Power Company Limited v. CIT (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 342 (SC), Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC), CIT v. REI Agro Ltd. GA No. 3022 of 2013 by its judgment and order dt. 23-12-2013 : 2014 TaxPub(DT) 836 (Cal-HC). DCIT v. REI Agro Ltd. ITA No. 1811/K/2012 by its Order, dt. 14-5-2013 : 2014 TaxPub(DT) 0999 (Kol-Trib) JK Investors (Bombay) Ltd And Others v. ACIT (OSD) & Others [ITA No.7858/Mum/2011, ITA No.7851/Mum/2011, dt. 13-3-2013]

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15


INCOLME TAX ACT, 1961

Section 14A

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