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Selene Infrastructure Ltd. Versus ITO, Ward-8 (1)

2016 (7) TMI 387 - ITAT DELHI

Disallowance u/s 14A - Held that:- For making any disallowance u/s 14A of the Act the AO shall determine the amount of total expenditure incurred by the assessee which does not form part of total income under his Act in accordance with such method as may be prescribed i.e. under Rule 8D of the Income Tax Rule, 1962. At the same time second subsequent part of sub section (2) of Section 14A of the Act imposes precondition that before such determination of disallowance the AO has to record that he .....

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the claim as well as suo moto disallowance, made by the assessee and thus the authorities below cannot validly make any disallowance and consequent addition u/s 14A - Respectfully following the decision of Hon’ble Jurisdictional High Court of Delhi in the case of Cheminvest Ltd. ( 2015 (9) TMI 238 - DELHI HIGH COURT ), we hold that no disallowance u/s 14A of the Act can be made where there is no exempt income. - Decided in favour of assessee - ITA No. 6650/Del/2013 - Dated:- 6-6-2016 - SHRI .....

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ounds for adjudication read as follows :- 1.The CIT(A) has erred on facts and circumstances of the case in confirming the addition made by the Assessing Officer (herein after referred to as AO ) amounting to ₹ 3,37,282/- u/s 14A read with Rule 8D 2. The CIT(A) has erred on facts and circumstances of the case in confirming the addition made by the AO u/s 14A read with Rule 8D without appreciating the fact that the Ld. AO proceeded to apply Rule 8 without recording his dissatisfaction on the .....

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s and carefully perused the relevant materials placed on record before the Tribunal. The Ld. Counsel for the assessee placing reliance on the decision of Hon ble Jurisdictional High Court of Delhi in the case of Maxopp Investment Ltd. vs. CIT dated 18.11.2011 passed in ITA No. 687/2009 submitted that primary satisfaction has not been recorded by the AO as per provision of Section 14A of the Income Tax Act, 1961 ( for short the Act) challenging the suo moto disallowance made by the assesee and th .....

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rs given by the Act. He drawn our attention towards para 9 and 9.1 of the first appellate order and contended that the CIT(A) recorded required satisfaction while upholding the action of the AO. 5. The Ld. Counsel also placed rejoinder to the above contentions of the Ld. DR, and submitted that the recording of satisfaction has to be made by the AO and the CIT(A) cannot fill the gap by using coterminous powers and these powers cannot be extended to fill the perversity and illegality in the assess .....

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ates the manner in which the AO has to determine the amount of expenditure incurred in relation to income which does not form part of total income. As per ratio laid down by Hon ble High Court of Delhi in the case of Maxopp (supra) and as per mandate of subsection (2) section 14A of the Act, we would find that the AO is required to determine the amount of such expenditure only if the AO, having regard to the accounts of the assessee, is satisfied with the correctness of the claim of expenditure .....

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- alleging and dismissing the correctness of the claim of expenditure made by the assesee. However from para 9 and 9.1 of the first appellate order, we note that CIT(A) has noted that the AO has not recorded required dissatisfaction on the correctness of the assesee s claim but he also further note that the argument of the appellant - assessee that AO has not recorded his dissatisfaction on the correctness of the appellants claim in respect of expenditure relatable to earning of tax-free dividen .....

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computing the total income under this Chapter, no deduction shall be 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 .....

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her to reassess under section 147 or pass an order enhancing the assessment 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. 8. In view of above mandate of this provision it is amply clear that for making any disallowance u/s 14A of the Act the AO shall determine the amount of total expenditure incurred by the assessee which does not form part of total income under .....

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