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2016 (10) TMI 883 - AT - Income TaxDsiallowance u/s 14A - NIL disallowance by the assessee - Held that:- We are unable to see any observations and conclusion of the A.O which states that the A.O was not satisfied with the correctness of NIL disallowance claim of the assessee and thus, as per sub-section (2) of section 14A of the Act, the A.O cannot proceed to determine the amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with the method as prescribed in Rule 8D of the Rules. In our humble understanding and language used by the Legislature in section 14A of the Act. The word ‘A.O’ has been used and we are unable to see any intention of the Legislature which mandates that compliance of sub-section (2) of section 14A of the Act can be made at the first appellate stage by the ld. CIT(A). Thus, we decline to accept the contention of the ld. counsel of the Revenue. On the basis of foregoing discussion, we are of the considered opinion that the disallowance made by the A.O and partly upheld by the ld. CIT(A) u/s 14A r.w.r. 8D(2)(ii) of the Rules is not sustainable in view of the proposition laid down by the Hon'ble High Court of Delhi in the case of Taishika [2014 (12) TMI 482 - DELHI HIGH COURT] and thus we demolish the same. Prior period expenses - disallowance on the preliminary ground these were not in fact in the nature of prior period expenses - Held that:- since these expenses/incomes are for the projects completed in the past years but were subjected to final payments to be made to the vendor or receivable from clients these difference arose and hence have been accounted for during the current period. The A.O has not controverted the above explanation and submission of the assessee and proceeded to make disallowance and addition by observing that the assessee is maintaining its books of accounts on mercantile basis. - the claim of the assessee was allowed consistently during the earlier and subsequent A.Y and expenses claimed by the assessee were shown under the heard of prior period expenses but it was incurred during the previous year relevant to A.Y 2009- 10. Thus the same cannot be disallowed and added to the income of the assessee. Therefore, the A.O is directed to allow the claim of the assessee
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