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2016 (6) TMI 932 - ITAT DELHI

2016 (6) TMI 932 - ITAT DELHI - TMI - Disallowance u/s 14A applying Rule 8D - non recording satisfaction that there is no expenditure disallowable u/s 14A as claimed by appellant in his return of income - Held that:- On reading of the assessment, order we do not find that AO has recorded any satisfaction on the claim of the assessee that no expenditure has been incurred which is disallowable u/s 14A of the Act - ITA No: 1250/Del/2014 - Dated:- 2-6-2016 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI .....

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1/- without recording any satisfaction or relying on the evidence of expenditure so incurred on the scrutiny of the accounts. (b) Further the CIT(A) has further failed to appreciate that the assessee has not incurred any expenditure against the earning of exempted income and the expenditure can not be presumed as the entire investment has been made from the personal a/c of the appellant. 2. That the CIT(A) and AO both have failed to appreciate that all the investment have been made by the appell .....

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therefore Ld. AO asked the assessee to furnish details of disallowance u/s 14A read with Rule 8D of the Income Tax Rules 1962. Assessee stated that it has not incurred any expenditure on earning exempt income. However Ld. AO applied Rule 8D and disallowed ₹ 1,46,271/- u/s 14A of the Act. Aggrieved by this assessee preferred an appeal before CIT(A) and submitted that Rule 8D is not applicable and AO has not recorded any satisfaction about the correctness of the claim of the assessee before .....

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ppeal is that Ld. AO before making any disallowance u/s 14A applying Rule 8D has not recorded any satisfaction that there is no expenditure disallowable u/s 14A as claimed by appellant in his return of income. Ld. AR of the assessee submitted that now this issue is covered by the decision of Hon ble Delhi High Court in the case of Taikisha Engineering Pvt. Ltd. Therefore, the disallowance is not sustainable. 4. Ld. DR relied on the orders of the lower authority. 5. We have carefully considered t .....

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e allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee .....

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essment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." Section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income under the Act. Under sub-section (2) of section 14A of the Act, the Assessing Officer is required to examin .....

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hat no expenditure was incurred to earn the exempt income. If and only if the Assessing Officer is not satisfied on this count after making reference to the accounts, that he is entitled to adopt the method as prescribed, i.e., rule 8D of the Rules. Thus, rule 8D is not attracted and applicable to all assessees who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute the disallowance as per rule 8D of the Rules. Where the disallowance or nil disallo .....

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d with- (a) the correctness of the claim of expenditure made by the assessee ; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the pro visions of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of fo .....

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d during the pre vious year ; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the bal ance-sheet of the assessee, on the first day and the last day of the previous year ; C = the average of total assets as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year ; (iii) an amount equal to one-half per cent. of the average of the value of investment, income from which does .....

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