TaxTMI 
TaxTMI 
2021 (10) TMI 548
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....llowances:- (i) Addition U/s. 14A Rs. 2,76,36,280/- (ii) Addition on account of disallowance of Bank Charges incurred for corporate guarantees Rs. 94,55,537/- (iii) Addition on account of prior period expenses Rs. 1,07,111/- 2.1. Aggrieved, the assessee approached the Ld. First Appellate Authority challenging the additions and disallowances. The appeal of the assessee was allowed by the Ld. CIT(A). 2.2. Now, the Department has approached this Tribunal challenging the action of the Ld. CIT(A) in deleting the disallowance made U/s. 14A of the Act. The grounds raised by the Department are as under:- "1. Whether on the facts & Circumstances of case, the Id. CIT(A) was correct in deleting the disallowance u/s. 14A r.w.r. 8D ignoring the fact that the assessee company didn't produce the specific documents in the shape of scripts of the mutual funds/shares in all the cases of the investment made as appearing in the balance sheet so that the invest which may yield exempt income. 2. Whether on the facts & Circumstances of case, the Ld. CIT(A) was correct in deleting the disallowance u/s. 14A r.w.r. 8D even without indent....
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....ary evidences to demonstrate that the investments were not related to earning exempt income. It was also submitted that the Ld. CIT(A) was not correct in deleting the disallowance of Rs. 15,42,508/- made suo moto by the assessee by relying on the judgment of the Hon'ble Apex Court in the case of M/s. Goetze (India) Ltd. vs. CIT. The Ld. Sr. DR also submitted that the Ld. CIT(A) was not correct in deleting the disallowance U/s. 14A of the Act completely ignoring that there was no co-relation between the dividend earned and disallowance U/s. 14A in terms of CBDT Circular No. 5/2014 dated 11.10.2014. The Ld. Sr. DR also submitted that, although, the assessee has submitted the calculation of disallowance u/s. 14A of the Act, the same was not found correct as per the records available and the submissions filed by the assessee company. It was submitted that since there was absence of details of scriptwise investments made by the assessee company, the Assessing Officer had no option but to compute the disallowance by taking the entire investments while doing so. It was also submitted that the assessee had incurred rental expenditure, personnel cost, depreciation, communication cost et....
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....rst satisfy himself/herself before embarking on the disallowance u/s. 14A r/w Rule 8D. Thus, while Section 14A of the IT Act stipulates that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act, it also places a duty on the AO to determine the amount of such expenditure incurred, in accordance with the prescribed method (Rule 8D), satisfaction of the AO regarding the assessee's claim of expenditure or NIL expenditure. Further, the issue stands fairly settled (albeit the Revenue's SLP has been admitted by the Apex Court) in view of the plethora of judicial pronouncements as under- * disallowance of expenses related to tax exempt income * satisfaction of AO, regarding claim of expenditure/nil expenditure disallowed by assessee from its books of accounts, compulsory * disallowance u/s. 14A not automatic. AO to show nexus between tax exempt income and related expenditure * earning of tax exempt income necessary for determining disallowance u/s. 14A * disallowance restricted to the quantum of tax exempt income receive....
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.... account either for turnover of for sale of mutual funds. The assessee company has also incurred banking chargers for all the banking transactions which also included the transaction of mutual fund. The assessee company also incurred rental expenses of, personnel cost, depreciation, communication cost of etc. as reflected in accounts of the company. All the expenses are directly related to the volume of transactions and therefore the undersigned is proposed his hereby allocate all the above expenses on the basis of turnover of the company for various items and for turnover of mutual funds..." 5.3 It can therefore be safely be inferred from the impugned order that the satisfaction of the AO for disallowance of expenses, in view of the presumed tax-exempt dividend income, u/s. 14A of the Act is drawn from the fact that the appellant suo motu made a disallowance of Rs. 15,42,508/-. Also, there appears to have been no objective analysis of the appellant's expense in this regard vis-a-vis its accounts. Only presumptions regarding possible common expenses have been taken as conclusion in the impugned order. Again, the legislative intent of Section 14A which is to disallow th....