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2021 (6) TMI 395 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - no activity of purchase and sale took place during the year - as argued by assessee no satisfaction was recorded by AO before making addition - HELD THAT:- As proper satisfaction is recorded by the AO inasmuch as making investment, maintaining or continuing with any investment in a particular share/mutual fund etc. and the time when to exit from one investment to another are all the activities requiring well-coordinated and well-informed management decisions, involving not only inputs from various sources but it also involves acumen of senior management functionaries. Decision to hold the shares and not to make any purchase of sales during the year could also be a conscious decision. Assessee does not maintain any separate account in respect of the purchase or sale of the shares on the connector expenditure and no such accounts are forthcoming for any assessment year. In the absence of any details furnished by the assessee, it is not possible for the learned Assessing Officer to record a detailed satisfaction with reference to the accounts of the assessee. It’s not as though Assessing Officer straightaway proceeded to compute the disallowance by invoking section 14A of the Act read with Rule 8D of the Rules. By recording the reasons, the learned Assessing Officer proceeded to compute the same. Hence, we reject the contention of the assessee that no satisfaction was recorded by the learned Assessing Officer and consequently the addition is bad. Alternative submission on behalf of the assessee to limit the disallowance to the tune of dividend income received - Submission supported by the decision of Joint Investments P. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] wherein it was held that the disallowance of expenditure u/s 14A of the Act cannot exceed the amount of tax exempt income. We, therefore, accept the same and direct the assessing officer to limit the disallowance under section 14A of the Act read with Rule 8D of the Rules and delete the rest of the addition. Appeal of the assessee is allowed in part.
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