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2021 (3) TMI 215 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - As per AO assessee has earned exempt income during the year and has not made any corresponding disallowance of expenses for earning of the exempt income - HELD THAT:- PMS fee has been paid to three funds as stated above and the investments made has yielded taxable income. The payment of to Motilal Oswal PMS Account was Rs. ₹ 11,125/- and the assessee has earned short term capital gain of ₹ 24,614/- from the securities dealt through this fund. Similarly, assessee has paid PMS fee to Trust Investment Equity of ₹ 2,06,018/- and claimed the same against short term capital gain of ₹ 1,53,995/- which is chargeable to tax. Likewise, assessee paid PMS fee to Trust Investment Debt of ₹ 1,27,812/- which has yielded taxable income of ₹ 6,08,676/- and thus all these expenses were incurred in relation to earning of taxable income and we find merit in the contentions of the learned counsel for the assessee that these cannot be disallowed as direct expenses relating to earning of exempt income. We are inclined to set aside the finding of learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance Disallowance being 0.5%of the average investments - Assessing Officer has simply rejected the submissions of the assessee without pointing out as to how the said submissions are wrong and thus has not recorded any satisfaction before invoking the provisions of section 14A r.w.r. 8D(2)(iii). The assessee has filed Income & Expenditure account before the Assessing Officer and each expense debited therein has been explained as having been incurred in relation to earning of taxable income. Assessing Officer has not controverted the submissions of the assessee but has simply invoked the provisions of Section 14A of the Act r.w.r 8D of the Rules without recording any satisfaction as to how the books of account of the assessee are not correct. So far as the disallowance under Section 14A of the Act r.w.r 8D(2)(iii) is concerned, we are not in agreement with the conclusion drawn by learned CIT(A) on this issue. The case of the assessee finds support from the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs CIT [2018 (3) TMI 805 - SUPREME COURT]. We, therefore, are inclined to set aside the order of learned CIT(A) following the ratio laid down in the above decision and direct the Assessing Officer to delete the addition made u/s 14A of the Act. Appeal of the assessee is allowed.
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