TaxTMI 
TaxTMI 
2018 (4) TMI 498
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....pany, e-filed its return of income for the AY. 2009-10 on 30-09-2009 admitting total income of Rs. 6,13,656/-. During the assessment proceedings u/s. 143(3) of the Income Tax Act [Act], the information regarding investments made by the assessee and the exempt income earned therefrom was called for. The assessee appeared and furnished the required information along with its books of account. The AO observed that in the P&L A/c, the assesseecompany reported the following income Rs. 73,09,278/- before claiming expenditure: i. Income from Mutual Funds : Rs. 27,05,667 ii. Dividend received : Rs. 20,28,315 iii. Other Income : Rs. 25,75,296 Rs. 73,09,278 2.1. AO observed that the income from Mut....
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.... "1. The Learned Commissioner of Income Tax (Appeals), Hyderabad [CIT (A)] has erred on facts and in law. 2. Learned CIT (A) has failed to note that the satisfaction as required u/s.14A of the IT Act has not been reached by the ITO (A.O). 3. The lower authorities have both failed to appreciate the import of judgment of the Bombay High Court in the case of Godrej & Boyce Manufacturing Company Pvt Ltd Vs. DCIT [328 ITR 81] according to which the satisfaction of the A.O must exist in order to apply the provisions of sec. 14A of the IT Act. 4. The Learned CIT (A) is not justified in sustaining the disallowance of Rs. 8,55,666/- without establishment by the A.O of the nexus between the exempt income and the exp....
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....ase before us, has not carried out any such exercise and therefore, the disallowance u/s. 14A is not sustainable. 5.1. Further, he also submitted that the disallowance under Rule 8D(2)(iii) should be only of the average of the investments which have yielded dividend income during the year and not on the average of the total of the investments made by the assessee. In support of his contentions, Ld. Counsel for the assessee placed reliance up on the following decisions: i. ITA No. 1846/Hyd/2014 (AY. 2010-11) in the case of Srinivasa Cystine Pvt. Ltd., Vs. Income Tax Officer, dt. 18-01-2017; ii. ITA Nos. 1436, 1643/Mds/2014 & 910/Mds/2015 in the case of M/s. Ambattur Clothing Ltd., Vs. Joint Commissioner of Income Tax, dt....
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....on to income which does not form part of the total income under this Act. Sub-section (3) of Section 14A provides that provisions of Sub-section 2 would also apply in relation to a case where assessee claims that no expenditure has been incurred by him in relation to income, which does not form part of the income under this Act. I find that in the case before us, the AO had issued a show cause notice to the assessee and after considering assessee's written objections dt. 25-11-2011 and not being satisfied with the same, has held that the disallowance u/s. 14A r.w. Rule 8D is to be made. The Hon'ble Bombay High Court has held that Rule 8D is applicable from the AY. 2009-10. Therefore, the grounds of appeal Nos. 2 & 3 as well as additiona....