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2021 (7) TMI 149 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - suo moto disallowance - AO found that the disallowance made by the assessee was not in pursuance to the provisions of section 14A read with rule 8D - HELD THAT:- AO has not recorded any satisfaction for making disallowance u/s 14A we noticed that AO at Page 5 of the assessment order has clearly stated that assessee has not maintained any record to demonstrate that no administrative expenditure has been incurred for the purpose of earning exempt income - AO has also cited instances of administrative expenditure such as the review of investment, monitoring of the activities of the company in which the assessee company has made substantial investment by the director of the assessee company and the employees of the assessee company etc.- salary paid by the assessee company to those employee and the director who have devoted their time towards investment activities have not been utilised exclusively for the purpose of the business of the company. No merit in the ground of appeal of the assessee that no satisfaction has been recorded by the AO before making disallowance u/s 14A - after perusal of the information on record filed by the assessee we observe that assessee has made investment in equity share of listed company's debentures, bond units of mutual fund etc. and all these have been made through portfolio management consultant who has provided full fledge services in that respect - assessee had suo-motu disallowed an amount u/s 14A - looking to the quantum of exempt income and investment made by the assessee it will be appropriate to restrict the disallowance out of administrative expenditure to the amount - Therefore, appeal of the assessee is partly allowed. Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB for addition u/s 14A r.w.r. 8D - HELD THAT:- Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction in the case of CIT Vs. Jayshree Tea Industries Ltd. [2014 (11) TMI 1169 - CALCUTTA HIGH COURT]. As independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income - we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation - we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. We note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1% of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the assessee is partly allowed.
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