2020 (11) TMI 709 - MADRAS HIGH COURT - Income Tax

Head Note / Extract:
Disallowance u/s 14A - Tribunal deleting the disallowance as there was no earning of exempt income during the assessment year - Whether no exempt income received by assessee? - non recording of satisfaction - amendment to Rule 8D brought in Finance Act, 2016 with regard to the quantum of expenditure that could be disallowed - HELD THAT:- Identical substantial question of law was considered by this Court in the decision in the case of CIT Vs. Celebrity Fashion Ltd. [2020 (9) TMI 1022 - MADRAS HIGH COURT] to which, one of us (TSSJ) was a party, wherein it was held that in terms of Section 14A of the Act, only expenditure, which was proved to be incurred in relation to earning of tax free income, could be disallowed and such provision could not be extended to disallow expenditure, which was assumed to have been incurred for earning tax free income. It was further held that to apply provisions of Section 14A of the Act, Assessing Officer should have recorded a finding as to how Sub-Section (1) of Section 14A of the Act would stand attracted and in absence of any such finding, the disallowance made was not justifiable. In the present case there is no opinion recorded by the Assessing Officer as to how Sub- Section (1) of Section 14A of the Act would stand attracted. - Decided in favour of assessee.