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Bombay Real Estate Development Co. Pvt. Ltd. Versus Asstt. Commissioner of Income Tax- Range-1 (1) , Mumbai

2017 (9) TMI 1096 - ITAT MUMBAI

Addition u/s 14A r.w.s.Rule 8D - calculation of disallowance - non recording of satisfaction with reference to the books of accounts - Held that:- In view of this fact and settled legal position, we are inclined to hold that invocation of provision of section 14A r.w.r.8D(2) is not justified without recording any satisfaction with reference to the books of account maintained by the assessee on the basis of which the assessee has not made any disallowance at all. However, we are of the considered .....

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assessee has challenged the sustenance of disallowance of ₹ 34,59,553/- by the ld. CIT(A) as made by the AO under section 14A of the Income Tax Act, 1961 r.w.s.Rule 8D of the Income Tax Rules, 1961 and also the issue of disallowance u/s 40(a)(ia) of ₹ 606,650/- made on account of non-payment of TDS on processional fees. 2. Brief facts of the case are that the assessee filed its return of income showing a loss of ₹ 33,85,526/- which was processed under section 143(1) of the Act .....

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to explain as to why the disallowance not be made u/s 14A of the Act in respect of the expenses incurred for earning the income claimed as income exempt as per rule 8D. In reply to the show cause notice, the assessee submitted that it has not incurred any expenses to earn exempt income and the reliance was placed on the decision in the case of TATA Fertilizers Ltd and also the reliance was placed in the case of Reliance Utilities and Power Ltd and other similar decisions. The AO after consideri .....

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an appeal before the ld. CIT(A). 3. Before the FAA, the ld.AR submitted that the disallowance of ₹ 34,59,553 was worked out under section 14A r.w.rule 8D without recording any satisfaction with reference to the books of account maintained by the assessee and hence the AO has violated the provisions of section 14A of the Actr.w.r.8D of the Rules. However, the ld.CIT(A) brushed the submissions of the assessee and dismissed the appeal of the assessee by observing and holding as under(4.1,4.1. .....

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e factual and legal position in the assessment order in para 3, which has been reproduced above for the sake of convenience. The decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce referred above is a specific to the issue that 'once a proximate cause for disallowance is established- which is the relationship of the expenditure with income which does not form part of the total income - a disallowance u/s 14A has to be effected.' The detailed discussion in para 3.4 .....

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which it pays rent, telephone, postage and courier charges, repairs and maintenance etc. The assessee has debited an amount of ₹ 1,38,612/- under the head 'Bank charges' and the same are directly attributable to the earning of dividend income and LTCG' - is valid and calls for application of Rule 8D. Section 14A Rule 8D is applicable for the assessment year under appeal which is a deeming provision and once the facts & circumstances requiring its application are fulfilled, .....

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being direct / dominant etc. The indicated expenditure in relation to exempt income pointed out by the AO is sufficient and confirming to the applicability of Section 14A read with Rule 8D as done by the AO. The decision in the case of Laxmi Ring Travelers CTS-210 - ITAT- 2012(Chny) is relevant and applicable where it was laid down that even in a case where an assessee claims that no expenditure was incurred, the assessing authority has to presume the incurring of such expenditure as provided u .....

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umption, the requirement of factual evidence is replaced by statutory presumption and the Assessing Officer has to follow the consequences stated in the statute. 4.1.1 The decisions of the Hon'ble higher judicial authorities referred by the appellant on this issue mostly relate to assessment year prior to the period of amendment by way of insertion of Rule 8D, and related to retrospective application of Sec.14A read with Rule 8D, which are not relevant for the year under appeal where the leg .....

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relying on the finding of the AO confirmed the action of assessing authority. The ld.AR relied on the decision of Delhi High Court in the case of CIT V/s Taikisha Engg. India Ltd reported in 370 ITR 338(Del) in defence of his arguments. The ld. AR also alternatively argued that a sum of ₹ 2 lakhs may be disallowed towards exempt income. Therefore, the ld. AR submitted that since there is no satisfaction recorded by the AO before invoking the provisions of section 14A r.w.r.8D the addition .....

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xempt income and invoked the provisions of section 14A r.w.r 8D citing to be it is mandatory with effect from assessment year 2008-09. The case of the assessee is also supported by the decision of the Hon ble Delhi High Court in the case of Taikisha Engg. India Ltd (supra), in which it has been held that where ordinary disallowance made by the assessee is found to be unsatisfactory on exempt income, the AO is capable and authorized to compute deduction under rule 8D, however satisfaction of the .....

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