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2016 (6) TMI 104 - ITAT DELHI

2016 (6) TMI 104 - ITAT DELHI - TMI - Disallowance u/s 14A - Held that:- Disallowance made by the Assessing Officer without recording any satisfaction as required by the mandate of Sub Section (2) of Sub Section 14 A of the Act cannot be held as sustainable.

Disallowance u/s 14A when no exempt dividend income was received during the period under consideration - Held that:- In this case in hand neither the A.O nor the CIT(A) has controverted this fact that the assessee has not earned a .....

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n doubt then no disallowance could be made u/s 14A of the Act. - Decided in favour of assessee - I.T.A. No. 4137 /Del/2013 - Dated:- 30-5-2016 - Shri S. V. Mehrotra, Accountant Member And Shri Chandra Mohan Garg, Judicial Member For the Appellant : Sh. Sajeve Deora, FCA For the Respondent : Ms. Rakhi Bimal, Sr. DR ORDER Per Chandra Mohan Garg, JM This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-XVIII, New Delhi dated 19/4/2013 passed in Fir .....

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had earned dividend on investment made in 1996 and further dividend income was credited directly to the bank account without any manual intervention and no expenses were incurred by the Appellant to earn such dividend income and that for such reason no disallowance u/s 14A of the Act is warranted. 3. We have heard argument of both the sides and carefully perused the material available on record before us. The Ld. Assessee s Representative (AR) drawn our attention towards relevant operative Para .....

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mitted that as per Section 14A (2) of the Act before making any disallowance under this provision the Assessing Officer is duty bound to record that having regard to the accounts of the assessee he 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 total income under this Act. The Ld. AR further drawn our attention towards entire assessment order para 1 to 3.1 and submitted that no satisfaction as re .....

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o disallowance of the assessee. 4. The Ld. Counsel drawn our attention towards recent judgment of Hon ble Jurisdiction High Court of Delhi dated 24/9/2015 in case of CIT(A) Vs. I.P Estate Support Services India Pvt. Ltd passed in ITA NO. 283/2014 and submitted that the Hon ble Jurisdictional High Court after considering its earlier decision in the case of Maxcopp Investment (P) Ltd. vs. CIT (2012) 347 ITR 272 (Del), categorically held that the Court disapproved of A.O invoking Section 14A Rule 8 .....

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2014 in ITA No. 486/2014 and 299/2014. The Ld. AR also has drawn our attention towards recent judgment of Hon ble Delhi High Court in case of Chemnivest Ltd. Vs. CIT reported as 378 ITR 33 (Delhi) and contended that the order of the ITAT Delhi in the case of Chemnivest Ltd Vs. ITO reported as 124 TTJ 577, which has been relied by the authorities below, has been reversed by the jurisdictional High Court wherein it was held that no exempt income was earned by the assessee in the relevant assessmen .....

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per judgment of Hon ble High Court of Delhi in case of CIT Vs. I.P Support Services India Pvt. Ltd(Supra) the A.O no empowered to invoke Section 14A read with Rule 8D of the I.T Rules 1962. The relevant operative part of this judgment of Hon ble Jurisdictional High Court reads as under: 8. Having heard the learned counsel for the parties, the Court finds that the AO has indeed proceeded on the erroneous premise that the invocation of Section 14A is automatic and comes into operation as soon as t .....

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ard 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 the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the cla .....

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hat no expenditure has been incurred http://www.itatonline.org ITA 283/2014 Page 5 of 6 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 which does not form part of the total income under the said Act and sub- section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt inc .....

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isdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in rule 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same. (emphasis sup .....

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