TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether disallowance under section 14A read with Rule 8D could be sustained when the assessee claimed that no borrowed funds were used and the Assessing Officer did not record dissatisfaction with the assessee's claim having regard to the accounts; (ii) Whether professional fees and contract payments could be disallowed under section 40(a)(ia) merely because tax deducted at source was deposited in April 2008 against invoices dated prior to March 2008.
Issue (i): Whether disallowance under section 14A read with Rule 8D could be sustained when the assessee claimed that no borrowed funds were used and the Assessing Officer did not record dissatisfaction with the assessee's claim having regard to the accounts.
Analysis: The disallowance under section 14A can be made by the prescribed method only when the Assessing Officer, having regard to the accounts, is not satisfied with the correctness of the assessee's claim. Where the assessee asserts that no expenditure was incurred for earning exempt income and the Assessing Officer does not first reject that claim by recording cogent dissatisfaction, Rule 8D cannot be invoked mechanically. On the facts, the investments were from own funds and no proper satisfaction was recorded.
Conclusion: The disallowance under section 14A read with Rule 8D was not sustainable and was deleted in favour of the assessee.
Issue (ii): Whether professional fees and contract payments could be disallowed under section 40(a)(ia) merely because tax deducted at source was deposited in April 2008 against invoices dated prior to March 2008.
Analysis: For the relevant assessment year, the proviso to section 40(a)(ia) had to be read in a manner that prevented unintended hardship where tax deducted at source was deposited before the due date for filing the return. The timing of approval or booking of the invoices did not alter the position once the tax was actually deposited within the permissible time recognised by the provision as interpreted by the Court.
Conclusion: The disallowances under section 40(a)(ia) were not sustainable and were deleted in favour of the assessee.
Final Conclusion: The appeal succeeded on all substantive grounds, with the additions under sections 14A and 40(a)(ia) set aside.
Ratio Decidendi: Rule 8D can be applied only after the Assessing Officer records dissatisfaction with the assessee's claim on the basis of the accounts, and section 40(a)(ia) should not be applied where the tax deducted at source is deposited within the time period recognised by the provision as applicable to the assessment year.
TaxTMI 
