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2021 (9) TMI 1464 - AT - Income TaxDisallowance u/s 14A - Necessity to record satisfaction - HELD THAT:- Although, the CIT(A) had observed that the possibility of use of services of staff, office and establishment relating to the proprietary business of the assessee for making investments in shares and mutual funds could not be ruled out, however, we find, that he too had failed to record his satisfaction that having regards to the accounts of the assessee, it was not possible to accept the correctness of the assessee‘s claim that no disallowance of any expenditure was called for u/s 14A. Assessee had maintained separate books of accounts for his activity of making investments in shares and mutual funds. Accordingly, in case the A.O; or the CIT(A) in exercise of his powers which are coterminous with that of an A.O, sought to disallow the claim of the assessee that no expenses could be attributed to earning of the exempt dividend income by him, then, there was an innate obligation cast upon them to have recorded the requisite satisfaction that having regard to the accounts of the assessee, as placed before them, it was not possible to generate the requisite satisfaction with regards to the correctness of the aforesaid claim of the assessee. We are afraid that as there is a clear lapse on the part of the lower authorities in validly assuming jurisdiction for dislodging the assessee‘s claim that no disallowance u/s 14A was called for in his hands, therefore, the disallowance worked out by the A.O u/s 14A r.w. Rule 8D(2)(iii) which thereafter had been sustained by the CIT(A) cannot be upheld and is liable to be vacated. The Ground of appeal no.1 is allowed in terms of our aforesaid observations. Claim of ‘education cess‘ on the tax payable by him should have been allowed while computing his income for the year under consideration - HELD THAT:- Claim of the Ld. A.R that unlike “rates” and “taxes” the amount paid by an assessee towards “Education Cess” or any “other cess” viz. the Secondary and Higher Education Cess is not a disallowable expenditure u/s 40(a)(ii) we find that the said issue is squarely covered by the recent order of the Hon‘ble High Court of Bombay in the case of Sesa Goa Limited [2020 (3) TMI 347 - BOMBAY HIGH COURT] therein conclude that “Education Cess” and the Secondary and Higher Education Cess is not disallowable as a deduction u/s 40(a)(ii) of the Act. Accordingly, we herein restore the issue to the file of the A.O with a direction to give consequential effect to our aforesaid observations. The additional ground of appeal raised by the assessee is allowed in terms of our aforesaid observations.
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