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TMI Blog2021 (8) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... on-satisfaction with the correctness of the claim of Rs. 27,382/- suo-moto disallowed by the Appellant u/s. 14A and doing so is wrong & contrary to the facts of the case, provisions of the Act, and the Rules made thereunder. 1.(b) The Id. CIT(A) ought to have restricted the disallowance u/s 14A to Rs. 27,382/- as computed by the appellant being fair and reasonable and correct claim having regards to accounts of the appellant company and not doing so is wrong and contrary to the facts and circumstances of the case the provisions of the Income Tax Act, 1961 and the Rules made thereunder. 1.(c) Without prejudice to the above, the Ld. CIT(A) erred in confirming the action of the learned Assessing Officer of disallowing proportionate interest expenditure u/s. 14A r.w.r BD(2)(ii) and doing so is wrong and contrary to the facts and circumstances of the case the provisions of the Income Tax Act,I961 and the Rules made thereunder. 1.(d) Without prejudice to the above, the Ld. CIT(A) erred in confirming the action of the learned Assessing Officer of disallowing proportionate administrative expenditure u/s. 14A r.w.r 8D(2)(iii) and doing so is wrong and contrary to the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). However, the CIT(A) not finding favor with the contentions advanced by the assessee sustained the additional disallowance that was made by the A.O u/s 14A r.w Rule 8D and dismissed the appeal. 5. The assessee being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. It was submitted by the ld. Authorized Representative (for short 'A.R') for the assessee that the A.O without recording any dissatisfaction as regards the correctness of the disallowance that was offered by the assessee u/s 14A had most arbitrarily and in a mechanical manner substituted the same by that as was computed by him u/s 14A r.w Rule 8D. In order to buttress his aforesaid claim the ld. A.R took us through the relevant observations of the A.O. It was submitted by the ld. A.R that the A.O without giving any reason for not accepting the correctness of the assessee's claim for disallowance u/s 14A had mechanically substituted the same by triggering the mechanism provided for computing the same in Rule 8D. It was submitted by the ld. A.R that as the A.O had wrongly assumed jurisdiction and made the additional disallowance u/s 14A r.w Rule 8D, therefore, the same could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same by that as was computed by him as per the methodology contemplated in Rule 8D of the Income-tax Rules, 1963. It is the claim of the assessee that the A.O without recording his dissatisfaction as regards the correctness of the suo motto disallowance under Sec. 14A that was offered by the assessee in its return of income had most arbitrarily dislodged and substituted the same by an amount that was computed by him as per Sec.14A r.w Rule 8D. On a perusal of the assessment order, we find, that the assessee had vide its letter dated 14.01.2016, Annexure-6, having regard to its accounts, therein furnished before the A.O the very basis for attributing an amount of Rs. 27,382/- (out of the 'administrative expenses') towards earning of the exempt dividend income during the year under consideration. Apart from that, the assessee had vide its "Note on disallowance u/s 14A" at Sr.No.1.2 submitted before the A.O that as sufficient own funds and interest free funds of Rs. 10.93 crore were available with it, therefore, no part of the interest expenditure could have been related to earning of the exempt dividend income. However, we find, that the A.O had summarily discarded the aforesaid exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assesses, as placed before him? It is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." In fact, the aforesaid view had thereafter once again been reiterated by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. VS. CIT (2018) 402 ITR 640 (SC). In the aforesaid case, it was observed by the Hon'ble Supreme Court that if the A.O was not satisfied with the disallowance that was offered by the assessee, then, he remained under a statutory obligation to record his dissatisfaction to the said effect, as it was only thereafter that he could assume jurisdiction and take recourse to and work out the disallowance as per sub-section (2) and (3) of Sec. 14A of the Act. 8. Now, in the backdrop of the aforesaid settled position of law, we shall herein deal with the claim of the ld. A.R that the A.O without recording his dissatisfaction as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure-6, therein furnished before him the very basis for attributing an amount of Rs. 27,382/- out of the 'administrative expenses' for earning of the exempt dividend income during the year under consideration. Also, we find, that the A.O had most arbitrarily bypassed the "Note on disallowance u/s 14A" at Sr.No. 1.2 that was submitted by the assessee in order to support his claim that as sufficient own funds and interest free funds of Rs. 10.93 crore were available with it, therefore, no disallowance of any part of the interest expenditure was called for in its hands. In the totality of the aforesaid facts, the A.O in our considered view without recording his dissatisfaction as regards the correctness of the suo motto disallowance under Sec. 14A that was offered by the assessee in its return of income could not have dislodged and substituted the same by an amount that was computed by him by triggering the mechanism provided in Rule 8D. Our aforesaid view is fortified by the judgments of the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC) and Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC). On appeal, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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