TMI Blog2015 (11) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to delete the addition - Decided in favour of assessee. Disallowance under sec. 14A read with Rule 8D - Held that:- Assessing Officer before invoking the provisions of Rule 8D has to record his satisfaction in terms of sub-section (2) of section 14A of the Act. In the present case, when the assessee himself had disallowed the expenditure incurred on the management of its portfolio for earning the dividend income, the Assessing Officer had to record his satisfaction first that the expenditure shown by the assessee for earning the dividend income was not satisfactory before invoking the provisions of section 14A of the Income-tax Act, 1961 read with Rule 8D of the I.T. Rules to make disallowance there under. In absence of the complianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned CIT(Appeals) has further failed to appreciate that for invoking the provisions of Rule 8D with section 14A the burden is on A.O. to establish a proximate nexus between the exempt income and the expenses incurred thereon before making any disallowance. 2. Besides above, the assessee has also moved an application for allowing the following additional ground for the adjudication of the ITAT: On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in confirming the disallowance of ₹ 2,97,684 made by the Assessing Officer invoking the provisions of sec. 14A read with Rule 8D . In support of the above application, the Learned AR submitted that the assessee had raised a similar ground befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to justify the claimed expenses in view of the fact that the assessee had made interest free advance of ₹ 8.89 crores. The assessee furnished his reply but the Assessing Officer did not agree with it and accordingly he disallowed the claimed expenses of ₹ 1,18,675. 7. The Assessing Officer also made disallowance of ₹ 2,97,684 under sec. 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962. In this regard, the Assessing Officer observed that the assessee had earned income exempt from tax amounting to ₹ 8,62,86,748. The assessee questioned the above disallowances before the Learned CIT(Appeals) but could not succeed. 8. The ground Nos. 1 and 2 are general in nature, hence, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the above submission, we are of the view that it is now a well established proposition of law that when assessee was having an adequate non-interest bearing fund, disallowance of interest paid on borrowed fund cannot be made since in such a case, there was no nexus between the advance given and borrowals made by the assessee. It is also not the case of the Assessing Officer that the loan was not taken for the business purposes. We thus while setting aside orders of the authorities below on the issue direct the Assessing Officer to delete the addition of ₹ 1,18,675. The ground No.3 is accordingly allowed. 13. Ground Nos. 4 to 6: The Assessing Officer made disallowance of ₹ 2,97,684 under sec. 14A read with Rule 8D. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been pleased to record their observation that the doctrine of approbate reprobate is only a species of estoppels, it applies only to the conduct of parties. As in the case of estoppels, it cannot operate against the provisions of a statute. If a particular income is not taxable under the I.T. Act, 1961, it cannot be taxed on the basis of stopples or any other equitable doctrine. Equity is out of place in tax law, a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the ITO has no power to impose tax on the said income. 15. The Learned AR also referred the decision of Hon ble jurisdictional High Court of Delhi in the case of CIT vs. Bharat General Insurance 81 ITR 303 (Delhi) in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. He submitted that books of account of the assessee are admittedly audited. The Learned AR placed reliance on the following decision: i) Wallfort Shares 310 ITR 421 (S.C); ii) Sesa Goa Ltd. vs. JCIT 60 SOT 121 (Panaji); iii) Joint Investment (P) Ltd. vs. CIT (2015) 92 CCH 088 (Delhi); 17. The Learned AR submitted that the assessee had produced his books of account before the Assessing Officer during the course of assessment proceedings and the same were examined, however, the Assessing Officer did not record its satisfaction that the book results of the assessee are not trustworthy. As per the ratio of the above cited decisions, the Assessing Officer before invoking the provisions of Rule 8D has to record his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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