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2020 (10) TMI 930 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - recording satisfaction - assessee’s objection that there is absence of satisfaction recorded by the Assessing Officer - HELD THAT:- We note that the AO has categorically stated that “Hence, having regard to the accounts of the assessee-company, I am satisfied that the claim of the assessee in respect of expenditure in relation to income which does not form part of the total income under the Income Tax Act, 1961 is not correct.” Plea that the AO has not recorded any satisfaction regarding assessee’s claim fails and in this view of the matter the case laws referred by assessee for the proposition that the disallowance in this regard on the touchstone of Rule 8D would fails in the absence of necessary satisfaction by the AO are not applicable, in as much as satisfaction of the AO is very much evident in the assessment order. Accordingly, this limb of claim of assessee’s argument is not correct. We note that the exempt income earned is only ₹ 3,99,270/- and the disallowance for administrative expenses incurred in this regard is ₹ 2,36,733/-. This at glance is not in accordance with principles of proportionality. Hence, we remit this issue to the file of the AO with the direction to assessee to submit its details of direct and indirect expenses which has been incurred in incurring exempt income. Addition being the interest income reflected in the AIR information not credited in the profit and loss account - HELD THAT:- Contention of assessee is that the said income did not belong to the assessee and it was mistake on the part of IL&FS Securities Ltd. to show the above sum as income of the assessee was not made before the AO nor the assessee had asked the Assessing Officer to issue/make any inquiry from the concerned entity. Hence matter is remitted to the file of the Assessing Officer. AO is directed to examine the assessee’s plea that the said income reflected in AIR information is wrong in as much as some does not belong to the assessee. Disallowance u/s 36(l)(ii) - Payment of bonus to its directors shareholders - HELD THAT:- AO in this case if he wants to invoke provisions of section 36(1)(ii) on the touchstone of M/S. DALAL BROACHA STOCK BROKING PVT. LTD. [2011 (6) TMI 251 - ITAT, MUMBAI]. AO will have to give clear cut finding as to what was tax avoidance or tax evasion involved in this case. For this purpose the AO will need to examine the amount of dividend which the assessee-company would have declared under the provisions of relevant payment of dividend as per the Company’s Act. He shall also compute tax sought to be avoided by the assessee company by the so called scheme of the company. In this regard the decision in the case of Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] is also relevant here as expounded that if the tax effect is revenue neutral, the proposition need not be disturbed. Here Assessing Officer shall examine the assessee’s submission that both the share holder directors or owners of the company have filed their individual return and have been taxed at the highest bracket in the context of this Hon'ble Supreme Court decision. So the tax impact and the emerging tax neutrality if any, needs to be evaluated on the touchstone of this decision also. The claim in this regard was duly submitted, as noted by learned CIT(A) himself in his order. Accordingly, we set aside the issue of allowability of payment of bonus to the director shareholders in accordance with our direction and the decisions quoted above
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