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2015 (10) TMI 752 - DELHI HIGH COURT

2015 (10) TMI 752 - DELHI HIGH COURT - [2015] 378 ITR 240 - Disallowance on account of invoking Rule 8D read with Section 14A - ITAT confirmed CIT(A)order in deleting the disallowance - Held that:- AO has indeed proceeded on the erroneous premise that the invocation of Section 14A is automatic and comes into operation as soon as the dividend income is claimed exempt. See Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] wherin held the presc .....

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recording his satisfaction and noted that the recording of satisfaction as to why "the voluntary disallowance made by the assessee was unreasonable and unsatisfactory" is a mandatory requirement of the law. - Decided against revenue. - ITA 283/2014 - Dated:- 24-9-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr Kamal Sawhney, Sr. Standing Counsel, Mr Ragvendra Singh, Junior Standing Counsel & Mr Shikhar Garg, Adv For the Respondent : Mr Piyush Kaushik, Adv ORDER 1. The app .....

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f the Income Tax Act, 1961? 3. Learned counsel for the Assessee has placed on record a copy of the order passed by the Assessing Officer ('AO') by pointing out that the copy at Annexure-I is not the correct copy. 4. The Assessee is a company engaged in the business of providing legal support and other support services to law firms. These services are specifically related to search of trade mark, patent and design out of the unique data base created and owned by the Assessee. The Assessee .....

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ed under Section 14A of the Act. The Assessee's representative submitted that as no expenses have been incurred for earning of dividend income, this was not a case for making any disallowance. The AO, inter alia, observed that "the invocation of Section 14A is automatic and comes into operation, without any exception, as soon as the dividend income is claimed as an exemption. The AO proceeded to disallow the amount of ₹ 33,35,986/- under Section 14A read with Rule 8D of Income Tax .....

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ery of PMS, who did not charge any fees." It was further found by the CIT(A) that contrary to the decision of this Court in Maxopp Investment (P) Ltd. v. CIT (2012) 347 ITR 272 (Del), the AO had failed to record the AO's satisfaction after examining the accounts which was requirement for invoking Section 14A of the Act. 7. In the impugned order dated 8th August, 2013, while dismissing the Revenue's appeal, the ITAT has additionally noted that the, CIT (A) has followed the order of t .....

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to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of t .....

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t his is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-section (3) is nothing but an offshoot of sub-section (2) of section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income .....

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