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2017 (11) TMI 710 - AT - Income TaxIncome recognition - Addition in respect of “Current Liabilities” in computation of taxable profits - Held that:- The amounts, which are appearing under the head “current liabilities”, cannot be taxed as income in this year, as the advance money cannot partake the character of an income, because the assessee was entrusted with the money for discharging of various legal obligations on behalf of its clients and held the money in fiduciary capacity and the money was recognised as client’s money in its accounts. Accordingly, the addition is deleted. Disallowance under section 14A - the assessee has earned dividend income and income from mutual funds which were claimed as exempt from tax under section 10(34) and 10(35) - Held that:- In view of the principle laid down in the case of H.T. Media Ltd. Vs. Pr. CIT reported in (2017 (8) TMI 962 - DELHI HIGH COURT), AO cannot proceed to make disallowance under section 14A. The Hon'ble Jurisdictional High Court has once again reiterated that it is mandatory and incumbent upon the Assessing Officer to record such satisfaction and in the absence of such ‘satisfaction’ no disallowance can be made under section 14A. The Hon'ble High Court concluded that; firstly, where there was a failure by Assessing Officer to comply with mandatory requirement of section 14A(2) read with rule 8D(1)(a) to record his satisfaction as required thereunder, then question of applying rule 8D(2)(iii) does not arise; and secondly, where Assessing Officer had failed to establish any direct nexus between investments made by assessee and interest expenditure incurred, then it not correct to remand the matter concerning deletion of disallowance of interest under clause (ii) of rule 8D(2) to Assessing Officer for fresh determination.
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