2014 (7) TMI 256

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.... During the course of regular assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) disallowed an amount of Rs. 2,56,32,363/-, as against the assessee's suo-moto disallowance of Rs. 1,75,73,740/- u/s 14A read with Rule 8D of the income Tax Rules. The ld. CIT(A) deleted the said disallowance made by the AO. The Revenue has thus come in appeal before us with the following grounds: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance of Rs. 80,58,623/- under provision of sec. 14A of the I. T. Act 1961 r.w. Rule 8D of the Income Tax Rules. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing netting off of interest inco....

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....l loan amount. The assessee had earned interest of Rs. 80,58,623/- on the such additional deposits made with 'the lender' to maintain the appropriate margin money. The total interest expenditure in respect of the loan amount was Rs. 2,55,81,815/-. Hence, for working out the disallowance u/s 14A read with Rule 8D, the assessee netted off the interest expenditure with the interest income and claimed financial expenses to the extent of the net amount of Rs. 1,75,23,192/- in the P&L account. The total administrative and financial expenses debited in the P&L account during the year (inclusive of Rs. 1,75,23,192/-) were Rs. 1,75,73,740/-. Hence, the assessee suo-moto disallowed the whole of administrative, selling and financial expenses o....

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....his case had suomoto disallowed the whole of the administrative, selling and financial expenses of Rs. 1,75,73,740/- (which included the net finance cost of Rs. 1,75,23,192/-) under section 14A while computing its taxable income. He further observed that as per subsection (2) section 14A of the Act, the AO could determine the disallowance as per rule 8D, if he, having regard to the correctness of the claim of the assessee in respect of such expenditure, was not satisfied. However, before doing so, the AO had to first demonstrate as to why the suo-moto disallowance made by the assessee was not satisfactory. But, the AO in this case simply worked out the disallowance as per Rule 8D. Even he, instead of taking the net interest expenditure, ado....