TMI Blog2021 (1) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the building in question and the AO will examine the claim in accordance with law, after affording assessee opportunity of being heard. This issue is accordingly set aside to the AO for fresh consideration. Disallowance of expenses under section 14A - suo moto disallowance - non recording of satisfaction - HELD THAT:- Assessee on his own has made the disallowance as expenditure incurred in earning exempt income. AO, without rejecting the basis of disallowance made by the AO, applied the provisions of Rule 8D(2) and made a disallowance under section 14A. Under section 14A(2) of the Act, the AO has recorded the satisfaction that the disallowance of expenses made by assessee suo-moto under section 14A of the Act is not correct. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to a related person referred to in section 40A(2)(b) of the Act and if the AO is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods/services or facilities for which the payment is made, then the expenditure to the extent considered excessive shall not be allowed as a deduction. It is not in dispute in this case that Ms. Esha Hasija was a relative and the AO was well within his powers to question the reasonableness of the rent paid to Ms. Esha. The AO noticed that the building for which rent was paid was in a busy locality in Wind tunnel road (Old Airport Road, Indiranagar, Bangalore), and the total built up area of 20,000 sq.ft. has been let out to the assessee on a mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BBMP cannot be the basis to arrive at the fair market value of the rent for the building in question. In this regard, the learned Counsel filed before us a copy of the circular and method of assessment by BBMP. A copy of which is placed at pages 70 and 86 of the assessee s Paper Book. It was submitted by him that the Wind Tunnel Road is an upmarket non-residential area and the rental values are highest. According to him, the annual rental value adopted by BBMP is for the purpose of levy of property tax and has nothing to do with fair market value. His submission was that under section 40A(2)(b) of the Act, what is important is only the fair market value of the rent. Learned Counsel also drew our attention to the circular No.6-P dated 6.7.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. 6. The next issue that arises for consideration is the disallowance of expenses under section 14A of the Act. As far as this issue is concerned, the factual details are that the exempt income earned by the assessee is only ₹ 2,10,898/-. The assessee on his own has made the disallowance of ₹ 72,000/- as expenditure incurred in earning exempt income. The AO, without rejecting the basis of disallowance made by the AO, applied the provisions of Rule 8D(2) and made a disallowance under section 14A of the Act of a sum of ₹ 10,02,522/- as follows: 5.10 Computation of Disallowance u/s 14A: Average Value of Investment from which exempt income is earned AY: 15-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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