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2017 (2) TMI 626 - AT - Income TaxDisallowance u/s 14A computation - Held that:- Revenue has invoked Rule 8D of Income-tax Rules, 1962 for making disallowance u/s 14A of the Act in a stereo typed manner without having regard to the accounts of the assessee and without satisfying the mandate of Section 14A(2) of the Act before making disallowance u/r 8D(2)(iii) of Income-tax Rules, 1962 read with Section 14A of the Act which in our considered view cannot be sustained in the instant appeal keeping in view facts and circumstances of the case moreso without pointing out and defect by the Revenue as to how the working of the disallowance submitted by the assessee u/s 14A of the Act is not correct having regard to the accounts of the assessee. AO did not made any attempt to work out disallowance of expenses incurred in relation to earning of income which does not form part of total income having regards to the accounts of the assessee in accordance with mandate of Section 14A(2) of the Act and also no attempt was made by the AO to dislodge the claim of the assessee in bringing forth and working disallowance u/s 14A of the Act having regard to the accounts of the assessee. In our considered view, the disallowance made by the A.O. in the instant appeal u/s 14A of the Act r.w.r. 8D(2)(iii) of Income-tax Rules, 1962 cannot be sustained and the disallowance of the expenses is to be made keeping in view expenses debited to the Profit and Loss Account (including , inter-alia, PMS Fees) having regard to the accounts of the assessee in accordance with mandate of Section 14A of the Act and hence, the issue is set aside to the file of the AO for making de-novo disallowance of expenses u/s 14A of the Act on merits in accordance with directions in this order in accordance with provisions of Section 14A of the Act. Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law before de-novo determination of disallowance of expenses u/s 14A of the Act on merits.
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