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2022 (1) TMI 527 - AT - Income TaxDisallowance u/s. 14A r.w. Rule 8D - Addition of the interest expenditure - disallowance of the interest expenditure qua the outstanding balance of advance/loan - HELD THAT:- We find that a similar disallowance with reference to the aforesaid outstanding amount was vacated by the Tribunal in the assessee's own case for AY 2011-12 and AY 2012-13 [2018 (5) TMI 2107 - ITAT DELHI] - Also, we find that relying on the aforesaid orders for the preceding years the tribunal had while disposing off the revenue's appeal in the case of the assessee for AY 2014-15 also, we find that relying on the aforesaid orders for the preceding years the tribunal had while disposing off the revenue's appeal in the case of the assessee for AY 2014-15 - Decided against revenue. Disallowance of the interest expenditure that was made by the Assessing Officer u/s. 14A by triggering the machinery provision contemplated in Rule 8D(2)(ii) - as observed by the CIT(A), and rightly so, as the interest expenditure in question was directly relatable to the loans that were taken by the assessee company for the purpose of its business, therefore, no part of the said interest expenditure could therein be attributed to the activity of earning of exempt income, and disallowed u/s.14A r.w. Rule 8D(2)(ii). See Bharti Overseas Pvt. Ltd. [2015 (12) TMI 1423 - DELHI HIGH COURT] no infirmity in the view taken by the CIT(A), who in our considered view had rightly vacated the disallowance of the interest expenditure made by the AO u/s. 14A r.w. Rule 8D(2)(ii). Enhancing the book profits u/s 115JB for Addition u/s 14A r.w.r. 8D - As is discernible from the order of the CIT(A), we find that he had by drawing support from case of ACIT vs. Vireet Investment Ltd. [2017 (6) TMI 1124 - ITAT DELHI],had observed, that no adjustment as regards the disallowance determined u/s. 14A r.w. Rule 8D could have been made for the purpose of determining the "book profit" u/s. 115JB of the Act. In our considered view, as the order passed by CIT(A) on the aforesaid issue does not suffer from any infirmity, therefore, the view therein taken by him is upheld. The Ground of appeal No. 3 raised by the revenue is dismissed. Mandation of recording satisfaction- as per assessee AO had determined the disallowance u/s. 14A r.w. Rule 8D without recording his satisfaction as to why the suo motto disallowance that was offered by the assessee in its return of income was not be accepted, therefore, he had wrongly assumed jurisdiction - HELD THAT:- We are principally in agreement with the contention of the ld. AR that pursuant to the judgment of the Hon'ble Supreme Court in the case of Maxopp Investments Ltd. [2018 (3) TMI 805 - SUPREME COURT] it is no more res integra that an AO prior to dislodging of the assessee's claim of disallowance u/s. 14A of the Act, remains under a statutory obligation to record his satisfaction that as to why the disallowance so offered by the assessee is not to be accepted, however, we find that the facts involved in the case of the assessee before us does not fall within the four corners of the aforesaid settled position of law, and thus, would not assist the case of the assessee before us. We find that the AO had after exhaustively dealing with the contention advanced by the assessee that the disallowance of ₹ 4 lac (supra) offered in the return of income was quite reasonable qua the exempt dividend income, had on the basis of elaborate reasons as to why the said claim of the assessee company was not to accepted and the disallowance was required to be determined as per the mechanism provided in Rule 8D, therein, dislodged the suo motto disallowance that was offered by the assessee in its return of income. We, thus, not being persuaded to subscribe to the claim of the ld. AR that the Assessing Officer had failed to record his satisfaction that as to why the assessee's claim for disallowance u/s. 14A was not to be accepted, reject the same. Manner of quantification of the disallowance of the administrative expenses attributable to earning of the exempt dividend income as per Section 14A r.w. Rule 8D(2)(iii) - the disallowance offered by the assessee company u/s. 14A r.w. Rule 8D(2)(iii) qua the administrative expenses i.e. after considering the 'average value' of such investments on which dividend income was actually received during the year, merits acceptance. We, thus, in terms of our aforesaid observations restrict the disallowance of administrative expenses u/s. 14A r.w. Rule 8D(2)(iii) to an amount of ₹ 21.03 lac, as was offered by the assessee in the course of the proceedings before the lower authorities. As the assessee company had already offered a disallowance in reference to the administrative expenses, therefore, we herein direct the AO to restrict the further disallowance.
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