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2021 (8) TMI 214 - AT - Income TaxDisallowance u/s 14A - AO not recorded satisfaction as required u/s.14A(2) - HELD THAT:- As disallowance of interest expenses under Rule 8D(2)(ii) of Income Tax Rules, 1962, is concerned, by following the decision of co-ordinate bench in assessee’s own case [2019 (5) TMI 1888 - ITAT CHENNAI] we direct the Assessing Officer to verify claim of assessee that it has sufficient own funds. In case, assessee is able to prove availability of own funds, then delete interest disallowance Rule 8D(2)(ii) of Income Tax Rules, 1962. Disallowance of other expenses under Rule 8D(2)(iii), it was the claim of learned AR for the assessee that disallowance computed by the Assessing Officer may be restricted to the extent of exempt income earned for the year under consideration. We find that issue of disallowances of expenditure u/s.14A in excess of exempt income earned for the year is no longer res integra. In the case Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] has considered an identical issue and held that disallowances contemplated u/s.14A cannot exceed exempt income earned for the year under consideration. A similar view has been taken by the Hon’ble High Court of Delhi in the case of Joint Investments Pvt .Ltd vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT]where it was held that disallowances contemplated u/s.14A cannot swallow entire exempt income for the year under consideration. In this case, the assessee has earned dividend income of ₹ 6,99,349/-, whereas the Assessing Officer has computed disallowance of ₹ 6,99,349/- . Therefore, we are of the considered view that disallowance computed by the Assessing Officer is disproportionate and contrary to the settled principle of law by various High Courts including the Hon’ble Delhi High Court. Hence, we direct the Assessing Officer to restrict disallowances contemplated u/s.14A read with Rule 8D(2)(iii) of the Income Tax Rules, 1962, to the extent of exempt income earned for the year. Disallowance of commission paid to Managing Director u/s.36(1)(ii) - AO disallowed commission paid to Managing Director u/s.36(1)(ii) of the Act, on the ground that the assessee has paid commission to Managing Director in lieu of profits or dividend - HELD THAT:- As decided in assessee’s own case [2019 (5) TMI 1888 - ITAT CHENNAI] we are of the considered view that Assessing Officer has erred in disallowing commission paid to Managing Director u/s.36(1)(ii) of the Act and hence, we are inclined to uphold the findings of the learned CIT(A) and reject ground taken by the Revenue.
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