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2019 (6) TMI 400

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..... proceedings to apply Rule 8D, it was incumbent on the part of AO in terms of Section 14A(2) to form an opinion as to why the disallowance offered by the assessee, having regards to the accounts of the assessee, was not satisfactory or correct. This would apply even in case wherein the assessee submits that no expenditure has been incurred to earn the exempt income. Therefore, the aforesaid satisfaction of AO, is sine-qua-non before clothing AO the power to acquire jurisdiction u/r 8D. In Maxopp Investment Ltd. Vs CIT [ . [2018 (3) TMI 805 - SUPREME COURT] has laid down certain vital propositions concerning disallowance u/s 14A as approved the applicability of disallowance u/s 14A to investments irrespective of motive to make such investment .....

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..... the facts and circumstances of the case and in law the Ld. CIT Appeals has erred in confirming the disallowance of ₹ 40,55,723/- u/s 14A r.w.r. 8D and adding it to the total income of the appellant. (b) The Ld. CIT Appeals failed to appreciate the fact that the appellant had received dividend from investments made in subsidiary companies, which were for the purpose of business. (c) The Ld. CIT Appeals failed to consider that the appellant is a Real Estate Company & all expenses claimed in its accounts were incurred for the purpose of business & thus no part of it can be disallowed under Rule 8D(iii). 2) (a) Without prejudice to the above ground even if disallowance is made u/s 14A r.w.r. 8D, the Ld. CIT (Appeals) has erred in .....

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..... e appeal is quantum of disallowance u/s 14A and adjustment thereof while computing Book Profits u/s 115JB. 2.2 Facts in brief are that the assessee being resident corporate entity stated to be engaged in Real Estate Development was assessed for impugned AY on 05/03/2015 in scrutiny assessment u/s 143(3) by Ld. Deputy Commissioner of Income Tax Officer-Central Circle 2(4), Mumbai [AO]. The income under normal provision was determined at ₹ 235.84 Lacs after sole disallowance u/s 14A for ₹ 40.55 Lacs as against returned income of ₹ 195.39 Lacs e-filed by the assessee on 28/09/2012. The Book Profits u/s 115JB was determined at ₹ 1044.39 Lacs as against ₹ 1003.83 Lacs computed by the assessee. The disallowance of &# .....

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..... t that the appellant had received dividend on investments made in subsidiary companies, which were for the purpose of business. (d) The Ld. CIT Appeals failed to consider that the appellant is a Real Estate Company & all expenses claimed in its accounts were incurred for the purpose of business & thus no part of it can be disallowed under Rule 8D(iii). 2.(a) Without prejudice to the above ground even if disallowance is made u/s 14A r.w.r. 8D, the Ld. CIT (Appeals) has erred in directing the Ld. AO to add it to the total income of the appellant instead of reducing it from Work in Progress. Reason being all expenses related to the project which is under construction are debited to Work in Progress and not Profit & Loss Account. (b .....

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..... was confirmed and Ld. AO was directed to consider the same separately for taxation purposes. Aggrieved, the assessee is in further appeal before us. 4. The Ld. Authorized Representative for Assessee [AR], Shri Parkash Jotwani, drawing our attention to the financials of the assessee, submitted that majority of the expenditure incurred by the assessee during impugned AY was directed towards construction activities only and therefore, impugned additions were not warranted. Per Contra, Ld. DR submitted that the disallowance was to be worked out as per formula given in Rule 8D. It was also brought to the notice that similar disallowance made in AYs 2010-11, 2011-12 & 2013-14 has been accepted by the assessee. 5.1 We have carefully heard the .....

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..... a, approved the applicability of disallowance u/s 14A to investments irrespective of motive to make such investments. Therefore, the said decision would have certain bearing on the issue under hand. We find that the quantum assessment orders for both the years have been framed prior to the aforesaid decision and both the parties did not have the benefit of the same. 5.4 Keeping in view the entirety of facts and circumstances, we deem it fit to set-aside the finding of Ld. first appellate authority, in this regard, for both AYs. Keeping all the issues open, the matter stand restored back to the file of Ld.AO for reconsideration on above lines. The matter of disallowance u/s 115JB would be considered keeping in view the statutory provisions o .....

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