TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 218
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..... 4,26,258/- under section 14A in respect of dividend income of Rs. 3,78,251/- without considering that no nexus has been established between the expenditure and the earning of dividend income. (2) On the facts and in the circumstances of the case, the Ld. Commissioner (Appeals) has erred in confirming the disallowance of Rs. 4,26,258/- under section 14A in respect of dividend income of Rs. 3,78,251/- without considering that neither any expenditure was incurred for earning said income nor for making investment in mutual funds as said investment was made by appellant out of its own interest free funds. (3) On the facts and in the circumstances of the case, the Ld. Commissioner (Appeals) has erred in confirming the disallowance of Rs. ....
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....missioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order rejected the contentions of the assessee and confirmed the disallowance of Rs. 4,26,258/- u/s. 14A r.w. Rule 8D. Against, the findings of the Commissioner of Income Tax (Appeals) the assessee is in second appeal before the Tribunal. 4. Shri Pramod Shingte appearing on behalf of the assessee submitted, that the assessee has earned dividend income of Rs. 3,78,251/- during the impugned assessment year from the investment made in the mutual funds. No fresh investment was made by the assessee during the assessment year under appeal. The authorities below have erred in making disallowance u/s. 14A r.w. Rule 8D without rejecting the books of account of....
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....ome Tax (Appeals). The ld. DR submitted that disallowance u/s. 14A r.w. Rule 8D have been rightly made by the authorities below. The contention of the assessee that even if disallowance is made, the assessee is eligible for deduction u/s. 80P is not sustainable in the light of decision by the Chandigarh Bench of the Tribunal in the case of Punjab State Co-operative Milk Producer Federation Ltd. Vs. Income Tax Officer reported as 104 ITD 408 (Chd). 6. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the rival sides have placed reliance. The assessee during the period relevant to the assessment year under appeal has ea....
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....s not recorded any reason for invoking Rule 8D. After perusal of the assessment order, we are satisfied that the Assessing Officer has invoked the provisions of section 14A r. w. Rule 8D in an arbitrary manner and in violation of provisions of sub-section (2) of section 14A of the Act. Section 14A(2) requires that for determining the amount of expenditure incurred in relation to exempt income the Assessing Officer has to record satisfaction. It is a well settled law that the Assessing Officer cannot straightaway proceed to apply Rule 8D, without considering the correctness of the claim made by the assessee, in respect of the expenditure incurred in relation to the exempt income. The Hon'ble Bombay High Court in the case of Godrej and Boyce ....
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....rred by him in relation to income which does not form part of the total income under the Act." The satisfaction of the Assessing Officer in this regard must be arrived at on an objective basis. The Assessing Officer cannot straight away proceed to apply rule 8D, without examining the merits of the assessee's claim, in respect of the expenditure disallowed by it under section 14A of the Act. For rejecting the correctness of the claim of the assessee, the Assessing Officer is required to give a reasoned finding that the expenditure or no expenditure disallowed by the assessee, is incorrect. We observe that in the present case the required exercise has not been done by the Assessing Officer before making disallowance by invoking the provisio....