2018 (6) TMI 293

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....learned CIT (A) failed to appreciate that neither Ld. AO has recorded any satisfaction about the expenses related to exempted income nor he found any specific actual incurrence of such alleged expenses and hence erred in sustaining the addition of Rs. 10,15,931/- made u/s 14A read with Rule 8D." 2. Briefly, the facts of the case are that on perusal of the P & L A/c and balance sheet, it reveals that assessee-company had made investment for the purpose of earning dividend income/income of Rs. 75,61,104/- which is exempt not chargeable to tax under the Income Tax Act. The assessee was asked to explain as to why the expenditure in relation to earning/intended earning of exempt income be not disallowed as provided under section 14A of the I.....

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.... Ld. CIT(A) misdirected himself in stating about the decisions for investment that too on a probabilistic view but not for exempt income more so when funds etc. itself provided sufficient services as explained by assessee before AO. Investments are admittedly out of own funds for which no addition is made. Ld. AR also took us to the order for AY 2011- 12 of assessee with identical facts on the issue which is on pages 15 to 19 of paper book where ld. AO has recorded in para 4 that, '.... It is evident that there is no expenditure which is directly attributable to exempt income (dividend). However , it cannot be ruled out that certain element of indirect expenses cannot be remotely attributable to the exempt income.....'. It is also stated th....

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....Hon'ble court after relying on Godrej & Boyce Mfg. Co. Ltd. 394 ITR 449(SC) held that AO failed to record proper satisfaction. In the case of Taikisha Engineering, hon'ble court has relied on hon'ble Bombay HC decision in above case of Godrej reported in 328 ITR 81 for the proposition that that satisfaction has to be recorded with respect to accounts in terms of ss. (2)/(3) of s. 14A and the provisions does not ipso facto enable AO to apply method prescribed in rules. This satisfaction must be on an objective basis having regard to claim of assessee. Rule 8 D(1) itself start with the words, 'where the assessing officer, having regard to the accounts of the assessee.......' in the absence of proper satisfaction. 12. In the most rece....