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2016 (10) TMI 421 - ITAT MUMBAI

2016 (10) TMI 421 - ITAT MUMBAI - TM - Disallowance u/s 14A - Held that:- On perusal of the orders, we find that by invoking the provisions of section 14A r.w.r 8D, the AO has not at all commented on the disallowance of ₹ 2,50,000/- which was made by the assessee suo mottu for earning exempt income. We are of the considered opinion that invoking the provisions of section 14A r.w.r 8D without recording the satisfaction by the AO is wrong and accordingly the order of the ld.CIT(A) by upholdi .....

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oking of the provisions of section 14A r.w.r 8D, and therefore application of section 14A r.w.r.8D is not correct as the necessary satisfaction in terms of section 14A(2) of the Act has not been recorded. Following the ratio laid down in the decision of the Tribunal (supra), we set aside the order of the ld.CIT(A) and direct the AO to delete the addition. This ground is allowed. - Disallowance while computing the book profit u/s 115JB of the Act. Since the issue regarding disallowance made u .....

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IT(A)-20, Mumbai for the assessment year 2009-10. 2. At the out set, we find from the record that there is a delay of 240 days in filing the appeal. The learned counsel has submitted that there is a genuine cause for delay in filing the appeal as enumerated by assessee in the affidavit dated 16.7.2013. The ld.counsel prayed that the delay be condoned and appeal be admitted for adjudication. 3. After hearing both the parties and on perusal of the affidavit filed by the assessee, we are of the con .....

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ed and referred to as Rules) and the ld. CIT(A) also ignored the fact that the AO had not reached appropriate satisfaction regarding the amount disallowed by the appellant of ₹ 2,50,000/-. 5. The ld. Counsel for the assessee, at the outset, submitted that the assessee has received dividend income of ₹ 2,09,85,607/- and made suo mottu disallowance of ₹ 2,50,000/- at the time of filing of the return of income which was not accepted by the AO. However, the ld.counsel submitted tha .....

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(Del); b) CIT V/s Joint Investments (372 ITR 694) (Del); c) Maxopp Investments Ltd V/s CIT (347 ITR 272); d) Kalyani Steels Ltd V/s Addl.CIT (ITA No.1733/PN/2012); e) 3DPM slftware Solutions Ltd V/s ITO (ITA No.5736/Mum/2012) The ld. Counsel submitted that the additions as made by the AO and confirmed by the ld.CIT(A) was totally wrong as the mandatory requirement of recording satisfaction has not been complied with as mandated by provisions of section 14A(2) of the Act. The ld. AR argued that .....

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d on the number of decisions as under : a) Cheminvest Ltd. v. CIT (Delhi)(2015) 378 ITR 0033 (Del). b) Gareware Wall Ropes Limited V Add.CIT(ITA No.5408/Mum/2012; c) M/s JM Financial Limited V/s Addl CIT(ITA No.4521/M/2012 d) CIT V/s Oriental Structural Engineers Pvt Ltd (Delhi High Court) The ld.counsel s last alternative argument is that the temporary deployment of the funds which were lying ideal in the company as the assessee has arranged these funds for the purpose of making capital explana .....

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t invoking the provisions of section 14A r.w.r 8D without recording the satisfaction by the AO is wrong and accordingly the order of the ld.CIT(A) by upholding the action of AO cannot be sustained. The case of the assessee finds supports from the various decisions of High Court as well Tribunal referred during the course of hearing. We find that in the case of Kalyani Steels Ltd (supra), the co-ordinate Bench of the Tribunal has held that non recording satisfaction with regard to the correctness .....

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of the total income under the Act. Sub-section (2) of section 14A of the Act prescribes that the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income in accordance with such method as may be prescribed, such prescribed method being contained in rule 8D of the Rules. However, the aforesaid empowerment of the Assessing Officer to invoke application of rule 8D of the Rules is superscribed by a condition containe .....

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an exempt income. The invoking of rule 8D of the Rules is permissible only when the Assessing Officer records the satisfaction in regard to the incorrectness of the claim of the assessee, having regard to the accounts of the assessee. In other words, section 14A(2) of the Act envisaged a condition precedent for invoking rule 8D of the Rules and computing disallowance thereof only if the Assessing Officer records that he is not satisfied with the correctness of the claim of the assessee in respec .....

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total income only in a situation where the Assessing Officer, having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. It, therefore, merits emphasis that sub-section (2) of section 14A does not authorize or empower the Assessing Officer to apply the prescribed method irrespective of the nature of the claim made by the assessee. The Assessing Officer has to first consider the correctness of the claim of the a .....

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a method had to be devised for apportioning the expenditure incurred by the assessee between what is incurred in relation to the earning of taxable income and that which is incurred in relation to the earning of non-taxable income. As a matter of fact, the memorandum explaining the provisions of the Finance Bill, 2006, and the Central Board of Direct Taxes circular dated December 28, 2006, state that since the existing provisions of section 14A did not provide a method of computing the expenditu .....

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e the assessee has claimed that no expenditure at all was incurred in relation to the earning of non-taxable income. 71. Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard t .....

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