Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (7) TMI 500 - AT - Income TaxDisallowance u/s 14A - rectification of mistake u/s 154 - HELD THAT:- AO has to examine correctness of the said suo-motu disallowance having regard to the books of account maintained by the assessee. If, the assessee neither makes any disallowance in the return of income nor furnishes the reason for doing so, the AO cannot be expected to record his satisfaction in vacuum. This, in our humble opinion, is the law propounded by the Hon’ble Supreme Court in [2018 (3) TMI 805 - SUPREME COURT]. We find that in the instant case before us, no suo-motu disallowance was made by the assessee towards indirect expenses u/s.14A. We are afraid that if the stand of the assessee is to be accepted, then the very purpose of introduction of provisions of Section 14A would stand defeated. Hence, we dismiss this line of argument of recording of satisfaction by the assessee in the peculiar facts and circumstances of the instant case. In the instant case, admittedly, there is no direct expenditure incurred for the purpose of earning exempt income. Hence only the indirect / administrative expenses are to be considered for working out the disallowance. We find that the assessee had held investments to the tune of ₹ 66.92 crores as on 31.3.2008 and derived exempt income in the form of dividends during the Asst Year 2008-09 . Considering the intention behind introduction of provisions of section 14A of the Act, the law laid down in various supreme court decisions referred to supra , considering the fact that computation of disallowance of indirect expenses in terms of Rule 8D(2)(iii) of the Rules resulting in absurdity in as much as majority of the expenses debited in the income and expenditure account getting disallowed thereon, considering the fact that substantial exempt income was derived by the assessee and considering the fact that definitely some time and energy would have been devoted by the assessee for monitoring the accounts tracking the investments and additionally incurring certain common indirect expenses , we hold that 25% of the aforesaid expenditure (i.e as per list above) to be attributable for the purpose of earning exempt income of the assessee which would meet the ends of justice in the peculiar facts and circumstances of the instant case. We hold that this decision would not fall as binding precedent for other cases due to its peculiar facts and circumstances.- Decided in favour of assessee.
|