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2017 (12) TMI 1328 - ITAT KOLKATAAddition u/s 14A - Held that:- Section 14A clearly lays down that the AO has to record objective satisfaction in respect of the disallowance offered by the assessee having regard to its books of accounts. We note that the assessee had furnished separate audited books of accounts of each division. lt is noted that due explanation in support of their disallowance of ₹ 7,74,703/- was also furnished by the assessee. The AO however seemed to have mechanically ignored the explanation stating that the submissions was untenable in law and unacceptable. There is a lack of recording of objective satisfaction on the part of the AO before making further disallowance u/s 14A of the Act. The jurisdictional Calcutta High Court in the case of CIT Vs REI Agro Limited (2013 (12) TMI 1517 - CALCUTTA HIGH COURT) stating that in absence of any proper and objective satisfaction being recorded by the AO in the assessment order, the AO's action of making disallowance under Section 14A by applying Rule 8D is bad in law. Disallowance under rule 8D(2)(ii) and 8D(2)(iii) in respect of exempted agricultural income - Held that:- The assessee engaged in cultivation of agriculture for which it maintains separate set of books of accounts.The said books are duly audited by Chartered Accountants. The gross receipts from agriculture was ₹ 4,09,95,906/-. The expenses incurred in this division was ₹ 3,19,13,917/- and depreciation was ₹ 2,41,902/-. Accordingly thenet agricultural income was computed at ₹ 88,40,897/- by the assessee which was claimed as exempt under the Act. It is therefore evidently clear that the assessee has already disallowed the expenses incurred in relation to earning of agricultural income. That is, all expenses, interest and depreciation pertaining to the agricultural income were already disallowed by the assessee and only the "net" amount was claimed as exempt under the Act, therefore, considering the factual position explained above, no further disallowance is required. We note that the AO has not rejected the books of accounts, he has also not pointed out any infirmity or defect in the separate divisional accounts maintained by the assessee. The separate divisional accounts were duly audited by a firm of Chartered Accountants.
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