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2016 (11) TMI 1369 - DELHI HIGH COURT

2016 (11) TMI 1369 - DELHI HIGH COURT - TMI - Disallowance u/s 14A r.w.r. 8D - Held that:- The language of Section 14A presupposes that the AO has to adduce some reasons if he is not satisfied with the amount offered by way of disallowance by the assessee. At the same time Section 14A (2) as indeed Rule 8D(i) leave the AO equally with no choice in the matter inasmuch as the statute in both these provisions mandates that the particular methodology enacted should be followed. In other words, the A .....

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laborate analysis carried out by the AO as indeed the three important steps indicated by him in the order, shows that all these elements were present in his mind, that he did not expressly record his dissatisfaction in these circumstances, would not per se justify this Court in concluding that he was not satisfied or did not record cogent reasons for his dissatisfaction to reject the AOs conclusion. To insist that the AO should pay such lip service regardless of the substantial compliance wit .....

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Section 260A of the Income Tax Act, 1961 (in short the Act ) is the Revenue s action in disallowing ₹ 3,87,10,146/- under Section 14A of the Act. The assessee urges that without recording his dissatisfaction as a prelude to the exercise conducted by him under the said provisions, further disallowance was not possible. 2. The facts are that the assessee had reported Tax Exempt Income to the tune of ₹ 105.24 crores, during Assessment Year ( AY ) 2009-10. The assessee had offered disall .....

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faction with respect to the amount offered by the assessee as disallowance i.e. expenses attributable to the earning of exempt income, had not been carried out in which the AO would have been clothed with jurisdiction to enter into the next stage and calculate the disallowance in terms of Rule 8D. 4. The Income Tax Appellate Tribunal (in short the Tribunal ) reversed the CIT(A) s opinion and held that in the circumstances of the case the opinion expressed by the AO was sufficient and justified t .....

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ecision of this Court in Commissioner of Income Tax-I vs Consolidated Photo & Finvest Ltd. (2012) 25 Taxman.com 371 (Delhi). In the present instance the AO carried out an elaborate analysis of Section 14A as well as the applicable case law and thereafter proceeded to state as follows: .... Further the case laws relied upon by the assessee have also been thoroughly examined and it is found that all the decisions have somehow unanimously have laid down certain ratios to be followed by the Asse .....

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iture under a particular provision then the onus would be on the assessing officer to prove that conditions for disallowance are satisfied...... .......The investment made, being a conscious decision and having deployment of funds clearly brings into picture expenditure by way of cost of funds, Invested." Composite fund having cost needs to be spread so as to apportion appropriate cost of funds invested in the activity lending to carrying of exempt income. In view of above, the provisions o .....

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exempt income and the expenditure incurred in relation to it and not vice versa. What is relevant is to work out the expenditure in relation to the exempt income and the expenditure incurred in relation to it and not vice versa. What is relevant whether the expenditure incurred by the assessee has resulted into exempt income or taxable income. From the three clauses of rule 8D it clearly emerges that stipulation of section is to compute the amount of expenditure which is not allowable u/s 14A as .....

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ever, keeping in view the substantial growth in investment during the year as compared to previous year, and quantum of tax free dividend income received. The third clause of Rule 8D is dearly attracted. The assessee has also invoked the p1·ovision of section 14A of I T Act while disallowing an amount of ₹ 2519380/- which is the amount paid to two employees as salary who have been exclusively involved in looking after the investment affairs of the company. Total disallowance is work .....

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