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2021 (7) TMI 1396 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Suo moto disallowance by assessee - Necessity of recording satisfaction - CIT(A) deleted the addition made by the AO with respect to interest disallowance observing that the amount of interest income shown by the assessee exceeds the amount of interest expenses and therefore there cannot be any disallowance - whether the AO can resort to the provisions of section 14A read with rule 8D without rejecting the suo-moto disallowance made by the assessee? - HELD THAT:- We find that the provisions of section 14A of the Act requires that the AO has to record the satisfaction after having regard to the accounts of the assessee as well as correctness of the claim of the assessee in respect of the expenditure incurred in connection with the exempted income. Admittedly, there was the disallowance made by the assessee against the exempted income. But the AO has not pointed out any defect in the disallowance made by the assessee. Thus in our considered view such act of the AO is in violation of the provisions of section 14A read with rule 8D of Income Tax Rule. As such, the AO was under the obligation to record the dissatisfaction about the correctness of the claim of the assessee. We find support and guidance from case of DCIT v/s Pidilite Industries Ltd. [2019 (6) TMI 470 - ITAT MUMBAI] wherein it was held that the AO has to form an opinion as to why the disallowance offered by the assessee, having regards to its accounts, was not satisfactory or correct. The aforesaid satisfaction of the AO is sine-qua-non, before acquiring jurisdiction under section 14A r.w. rule 8D - we are not convinced with the order of the ld. CIT-A and thus, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Nature of expenses - business development expenditure - Revenue or capital expenditure - HELD THAT:- As decided in assessee own case[2016 (11) TMI 1730 - ITAT AHMEDABAD] business development expenditure to be Revenue in nature - accordingly, we dismiss the ground of appeal of the Revenue.
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