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2019 (6) TMI 400 - AT - Income TaxDisallowance u/s 14A - expense disallowance u/r 8D(2)(iii) computed @0.5% of average investments - adjustment thereof while computing Book Profits u/s 115JB - HELD THAT:- Submissions of AR are two-fold i.e. majority of the expenditure incurred by the assessee during impugned AY was directed towards construction activities and secondly, no expense has been incurred by the assessee towards earning of exempt income in view of the fact that the investments were old and there was no major shift in the investments. These two aspects, in our opinion, has remained to be examined in proper perspective by AO during assessment proceedings. Before proceedings to apply Rule 8D, it was incumbent on the part of AO in terms of Section 14A(2) to form an opinion as to why the disallowance offered by the assessee, having regards to the accounts of the assessee, was not satisfactory or correct. This would apply even in case wherein the assessee submits that no expenditure has been incurred to earn the exempt income. Therefore, the aforesaid satisfaction of AO, is sine-qua-non before clothing AO the power to acquire jurisdiction u/r 8D. In Maxopp Investment Ltd. Vs CIT [ . [2018 (3) TMI 805 - SUPREME COURT] has laid down certain vital propositions concerning disallowance u/s 14A as approved the applicability of disallowance u/s 14A to investments irrespective of motive to make such investments. Therefore, the said decision would have certain bearing on the issue under hand. We find that the quantum assessment orders for both the years have been framed prior to the aforesaid decision and both the parties did not have the benefit of the same. Keeping in view the entirety of facts and circumstances, we deem it fit to set-aside the finding of Ld. first appellate authority, in this regard, for both AYs. Disallowance u/s 115JB would be considered keeping in view the statutory provisions of Section 115JB as well as the decision rendered in ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and other binding judicial precedents. - Assessee appeals stand allowed for statistical purposes.
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