Tribunal rules in favor of taxpayer in disallowance case under Income-tax Act

ACIT, Circle 9 (1), New Delhi Versus M/s. Feedback Infra Pvt. Ltd.

ACIT, Circle 9 (1), New Delhi Versus M/s. Feedback Infra Pvt. Ltd. - Tmi Issues:
Disallowance under section 14A read with Rule 8D of the Income-tax Act, 1961.

Analysis:
1. Issue of Disallowance under Section 14A read with Rule 8D:
- The Assessing Officer (AO) observed that the assessee company had shown significant investments in equity shares, leading to scrutiny under section 14A of the Act. The AO computed a disallowance under Rule 8D, resulting in a disallowance of Rs. 62,58,956.
- The Commissioner of Income-tax (Appeals) deleted the disallowance, prompting the Revenue to appeal before the Tribunal. The Revenue argued that the AO's disallowance under Rule 8D was based on the accounts provided by the assessee.
- However, the Tribunal noted that the AO mechanically invoked section 14A read with Rule 8D without recording dissatisfaction, which is impermissible. The Tribunal referred to legal precedents, including the judgment in Maxopp Investment Ltd., emphasizing the need for the AO to reject the claim of the assessee with cogent reasons before determining the disallowance.
- Citing the Supreme Court's decision in Godrej & Boyce Manufacturing Company Ltd., the Tribunal reiterated the requirement for the AO to be satisfied with the claim of the assessee before invoking Rule 8D. The Tribunal concluded that if no exempt income was earned, section 14A read with Rule 8D did not apply. As the AO failed to record dissatisfaction, the Tribunal upheld the CIT(A)'s decision to delete the addition.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and reasoning behind the Tribunal's decision regarding the disallowance under section 14A read with Rule 8D of the Income-tax Act, 1961.