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2018 (10) TMI 1770 - AT - Income TaxDisallowance u/s 14A r.w.r 8D - assessee contended that the AO has applied the provisions Rule 8D without recording satisfaction against the correctness of the disallowance made by the AO - HELD THAT:- The undisputed facts remain that the assessee is a trader in shares and securities and the assessee has held its entire securities as “stock in trade” only. The assessee did not hold any security as its investment. In the instant case, we notice that the assessing officer did not record any dissatisfaction over the amount of disallowance determined by the assessee u/s 14A of the Act, having regard to the accounts of the assessee. Further, we notice that the AO has proceeded on the erroneous presumption that the application of Rule 8D is mandatory in nature. AO has proceeded to invoke the provisions of Rule 8D of the I.T rules, without showing that he was not satisfied with the workings given by the assessee having regard to the accounts of the assessee. Further, the understanding of AO with regard to the disallowance u/s 14A of the Act is inconsistent with the principles laid down by the Hon’ble High Courts and Supreme Court. We are of the view that the Ld CIT(A) was justified in holding that the AO was not justified in invoking Rule 8D to compute disallowance u/s 14A, without showing that he was not satisfied with the amount of disallowance worked out by the assessee. Accordingly we uphold the order passed by Ld CIT(A) on this issue. Ld CIT(A) that the assessing officer was not correct in law in applying the provisions of Rule 8D in both the years, since the AO has failed to show/record, having regard to the accounts of the assessee, that he was not satisfied with the disallowance computed by the assessee. We have upheld the order passed by Ld CIT(A) in setting aside the disallowance worked out by the AO. We have also noticed that the Hon’ble Supreme Court has held in the Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] that the disallowance u/s 14A shall be triggered if exempt income ie. earned, even if the shares are held as stock in trade. Under these set of facts, the disallowance worked out by the assessee should be considered as meeting the requirements of sec.14A of the Act. - Decided against revenue
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