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Deva Lease and Finance (P) Ltd. Versus C.I.T., Kol-1, Kolkata

Revision u/s 263 - mandation for the AO to apply Rule 8D - According to CIT the AO ought to have made disallowance u/s 14A of the Act in terms of Rule 8D of the Rules - Held that:- Invoking of Rule 8D of Rules is not automatic and that the AO u/s 14A of the Act has the discretion to substitute the computation of disallowance u/s 14A as made by the assessee is under estimation. The satisfaction contemplated u/.s 14A (2) of the Act is not merely restricted to rejecting the claim made by the assess .....

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given above, We quash the order u/s 263 and allow the appeal of the assessee. - ITA No.1554/Kol/2013 - Dated:- 1-6-2016 - Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM For The Appellant: Shri D.K.Kothari, FCA For The Respondent: Shri Rajat Subhra Biswas, CIT(DR) ORDER PER N.V.VASUDEVAN, JM: This is an appeal by the Assessee against the order dated 26.03.2013 of CIT, Kolkata-1, Kolkata, relating to AY 2008-09 passed u/s 263 of the Income Tax Act, 1961 (Act). 2. The circumstances under which .....

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sessee. In the course of assessment proceedings u/s 143(3) of the Act, in response to a query by the AO in this regard, the assessee submitted before the AO that it had investments both in quoted and unquoted shares and also filed a statement showing a sum of ₹ 1,57,930/- as expenditure incurred in earning exempt income. The basis on which the same arrived at by the assessee was as follows :- CALCULATION OF DISALLOWANCE U/S 14A SUBMITTED TO ASSESSING OFFICER (WITHOUT PREJUDICE) Opening Inv .....

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powers u/s 263 of the Act was of the view that the aforesaid order of the AO making disallowance u/s 14A of the Act was erroneous and prejudicial to the interest of revenue. According to CIT for A.Y.2008-09 Rule 8D of the Income Tax Rules, 1962 (Rules) was applicable and that rule provides the basis of making disallowance u/s 14A of the Act. According to CIT the AO ought to have made disallowance u/s 14A of the Act in terms of Rule 8D of the Rules and if the AO had done so, the disallowance u/s .....

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namely: A x B/C, where, A = amount of expenditure by way' of interest other than the amount of interest included in Point no. (i) incurred during the previous year. B= the average of value of Investment, income from which does not or shall not form part of the total income, as appearing ill the Balance sheet of the assessee, on 'he first day and the last day of tire previous year. C= the average of total Assets as appearing in the Balance sheet of the assessee, on the first day and the l .....

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facts and failed to apply the relevant provisions of Section 14A read with Rule 8D . He has therefore failed to apply his mind and discharge his duty as an assessing officer during the scrutiny proceedings u/s. 143(3) of the LT. Act. Hence the order passed by the A.O. u/s.143(3) was erroneous in so far us it is prejudicial to the interest of revenue . 5. In response to the show cause notice issued by the CIT on lines indicated above the assessee submitted that the AO after considering the facts .....

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ontentions as put forth by the asssessee and he held as follows :- 13. In this case the A.O. has failed to make correct disallowances u/s.14A of the Act read with Rule 8D(I) of LT. Rules 1962 resulted in under assessment of income of ₹ 400,5263/-. Therefore, the order passed by him is erroneous and prejudicial to the interest of revenue. In view of the above the order passed by the A.O. is set aside with the direction that he should pass the assessment order after examining the issue in th .....

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ggrieved by the order of CIT the assessee has preferred the present appeal before the Tribunal. 8. We have heard the rival submissions. The provisions of section 14A as originally introduced and as amended from time to time as well as the insertion of Rule 8D was subject-matter of several decisions rendered by various Benches of the ITAT as well as the Hon ble High Courts. The Hon ble Delhi High Court in the case of Maxopp Investments Ltd. v. CIT 2011) 203 Taxman 364 (Del) and the Hon ble Bombay .....

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O that the claim made by the assessee, can the AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules. 9. In the present case, the assessee, in so far it relates to common expenses [falling within the ambit of Rule 8D(2)(iii) of the Rules, has taken a stand that a particular amount has to be disallowed as expenditure incurred in earning exempt dividend income. The AO did not agree with the claim of the Assessee and he estimated the disallowance on a different basis. The .....

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