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2023 (5) TMI 1005 - AT - Income Tax
Disallowance u/s 14A r.w.r. 8D - Assessee did not make any disallowance u/s 14A in computation of income - HELD THAT:- Reason given by AO for the impugned disallowance that the assessee did not make any disallowance u/s 14A in computation of income completely ignoring the assessee’s explanation offered before him that the expenditure claimed in profit and loss account has duly been disallowed in computation of total income and treated as pre-operative expenses capitalised as fixed assets.
During the year the assessee had no business income and therefore, no expenses were claimed as business expenses or any expense under the head “other sources”. Hence, no disallowance of expenses is called for under section 14A r.w. Rule 8D.
CIT(A) also misapplied the decision of Godrej & Boyce’s case [2017 (5) TMI 403 - SUPREME COURT] as legal import of the decision is that the expenditure incurred in earning the exempt income cannot be allowed to be deducted which is as per law enshrined in section 14A - CIT(A) also discarded the explanation of the assessee that no expenditure was incurred to earn dividend income since the entire expenditure had been capitalised as ‘Capital Work-in Progress’ without assigning any valid legal and tenable reasons.
Identical disallowances made in preceding AY 2011-12 and 2012-13 have been deleted by the Ld. predecessors of the Ld. CIT(A). Rule of consistency must be adhered to if the facts and circumstances of the case remain the same. Decided in favour of the assessee.
CIT(A) has already given direction for verification of opening and closing amount of investment for calculating disallowance under section 14A r.w. Rule 8D. We reiterate the same direction