Latest - TMI e-Newsletter
New User/ Regiser
2021 (10) TMI 419 - Income Tax
Disallowance u/s 14A read with Rule 8D (2)(iii) on account of disallowance of expenditure incurred to earn tax exempt income - Suo moto disallowance made by assessee - HELD THAT:- Window for disallowance indicated in section 14A is only to the extent of disallowing the expenditure incurred by the assessee in relation to the tax-exempt income. This proportion or portion on the tax exempt income surely cannot swallow the entire amount of tax-exempt income. In the case, in hand, no disallowance is attracted on account of interest expenditure. The only disallowance attracted is in relation to the administrative expenses.
The assessee has suo-moto disallowed the sufficient on account of fees paid to the portfolio manager - we do not find justification on the part of CIT(A) in confirming the disallowance made by the AO by invoking the formula under Rule-8D(2)(iii), merely on assumption basis without recording the satisfaction as to how the suo-moto disallowance made by the assessee was not co-relating to the accounts of the assessee vis-à-vis other circumstances - the impugned order of the Ld. CIT(A) is set-aside and the disallowance u/s 14A is restricted to that has been suo-moto made by the assessee. Appeal of the assessee stands allowed.