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2016 (2) TMI 119 - ITAT KOLKATA

2016 (2) TMI 119 - ITAT KOLKATA - TMI - Disallowance u/s 14A - Held that:- We find from the facts of the instant case that the Learned AO has though had examined the accounts of the assessee with regard to the availability of own funds in the context of making separate disallowance of interest on borrowed capital u/s 36(1)(iii) of the Act, did not look into the accounts of the assessee in the context of Rule 8D(1) of the IT Rules and record his satisfaction as mandated thereon that the claim of .....

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t the Learned AO rejected the claim of assessee with regard to claim of assessee that no expenditure was incurred in relation to exempt income without indicating any cogent reasons for the same. We find that the Learned AO had straight away embarked upon computing disallowance under Rule 8D(2)(iii) of the Rules.

Hence we hold that the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules is not appreciated and hence no disallowance u/s 14A of the Act could be made .....

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sessment passed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). 2. The only issue to be decided in this appeal is as to whether the provisions of section 14A of the Act read with Rule 8D(2)(iii) of the IT Rules could be applied in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is engaged in the business of developing properties and partly selling them and partly giving them on rent. The asses .....

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his auto swap account from mutual funds. During the course of assessment proceedings, the Learned AO observed that the assessee had made investment in shares of ₹ 62,32,50,000/- during the year and based on this he directly proceeded to apply the second and third limb of Rule 8D(2) of the IT Rules and made disallowance u/s 14A of the Act. By applying the second limb of Rule 8D(2)(ii) of the Rules, a disallowance of ₹ 7,28,598/- was made which was deleted by the Learned CITA on first .....

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The assessee made investment in Group Companies and most of the same are brought forward from earlier year. No activity for the same is required. Hence, no expenses can be attributable to the same. As such, addition confirmed by the ld.CIT(A) need not be deleted." 4. The Learned AR argued that the Learned AO did not record his satisfaction in terms of Rule 8D(1) of the Rules as to why the claim made by the assessee that no expenses were incurred for earning exempt income is incorrect in the .....

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ower authorities and in addition with regard to non-requirement of recording of satisfaction, relied on the decision of this tribunal in the case of ACIT vs Champion Commercial Co. Ltd reported in 139 ITD 108 (Kol ITAT). 5. We have heard the rival submissions and perused the materials available on record including the case laws relied upon by both the sides. We find that the only issue to be decided in this appeal is as to whether the recording of satisfaction in terms of Rule 8D(1) of the Rules .....

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that the claim of the assessee that no expenditure was incurred for earning exempt income is incorrect. The assessee had claimed that no expenses were incurred by it for the purpose of earning the exempt income in the form of dividend as admittedly the said dividend income was earned out of auto swap funds which was done directly by the bank without any interference from the side of the assessee. Hence there was no need for the assessee to incur any expenditure thereon for earning the dividend i .....

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014 rendered by Calcutta High Court "While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. .....

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