TaxTMI 
TaxTMI 
2022 (10) TMI 75
X X X X Extracts X X X X
X X X X Extracts X X X X
....3,215/- under Section 14A of the Income Tax Act. This disallowance has been made on adhoc basis and has not been substantiated by the appellant. The fact that the appellant had made disallowance under Section 14A shows that the appellant concedes that certain amount of expenditure was incurred in respect of earning the income. ...provisions of Section 14A read with Rule 8D are applicable as there is no other method but to apply rule 8D to calculate the disallowance. The Appellant objects to the above observations made by the learned CIT(A). 3. Without prejudice to the above grounds, the learned CIT(A) erred in not dealing with the alternate ground of appeal [ground no. 7 before CIT(A)] filed by the Appellant with respect nongrant of deduction by AO under section 10B (modified to section 10A) of the Act for the above disallowance of Rs.1,35,93,675 under section 14A of the Act. The grounds no. 7 before the CIT(A) reads as under: "Without prejudice to the above, the learned AO erred in not allowing the deduction under section 10B of the Act for the above disallowance of Rs.1,35,93,675 under section 14A of the Act. Consequently, the learned AO erred in recomputing the quantum o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in, he confirmed the disallowance u/s 10B r.w.s. 14A, the assessee company is in appeal before us in the present appeal. 7. The grounds of appeal No.1 and 2 challenges the addition of Rs.1,35,93,675/- u/s 14A as confirmed by the CIT(A) as Rs.1,20,60,460/-. The assessee company offered suo motu disallowance of Rs.15,33,215/- under the provisions of section 14A of the Act. It was contention of the assessee company before the AO that the assessee derived exempt income from the investments made in mutual funds for which no separate charges required to be paid by the assessee and there was no entry or exit load. Despite this fact, the assessee company had disallowed 1/3rd portion of three employees u/s 14A and offered to tax. However, the AO rejected the contention in view of the fact that the assessee company made substantial investments in mutual funds and incurred substantial expenditure to earn the exempt income and worked out the disallowance u/s 14A read with rule 8D(2)(iii) which worked to Rs.1,35,93,675/-. After reducing the amount of suo motu disallowance offered by the assessee, the balance amount of Rs.1,20,60,460/- was brought to tax by the AO. On appeal before the ld. CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it is incumbent upon the AO to record satisfaction as to the correctness or otherwise of the assessee company that only an expenditure of Rs.15,33,213/- was incurred to earn the exempt income. The Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (supra) held as follows: "41. Having regard to the language of section 14A(2) of the Act, read with rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the Assessing Officer needs to record satisfaction that having regard to the kind of the assessee, suo motu disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the Assessing Officer." 11. Even the Hon'ble Bombay High Court in the case of Pr.CIT vs. Reliance Capital Asset Management Ltd, 400 ITR 217 (Bom) held as under: "The AO is not entit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t year 2010-11 in ITA No.1464/PUN/2017 dated 30.08.2022 in favour of assessee company. The ld. CIT-DR had not made out case before us to take different view. Respectfully, following the decision of the Tribunal in assessee's own case (supra), we hold that the assessee company is entitled for deduction u/s 10B of the Act. 15. In the result, the appeal in ITA No.2402/PUN/2017 for A.Y. 2011-12 stands allowed. ITA No.2403/PUN/2017, A.Y. 2012-13 16. The assessee has raised the following grounds of appeal: "1. The learned CIT(A) erred in confirming the disallowance of Rs.65,08,219 made by the Assessing Officer ("AO") under section 14A of the Income Tax Act, 1961 ("the Act"). 2. The learned CIT(A) erred in making following observations which are contrary to the facts of the case and in law: ...It is seen that the appellant itself has disallowed Rs.2,55,536/- under Section 14A of the Income Tax Act. This disallowance has been made on adhoc basis and has not been substantiated by the appellant. The fact that the appellant had made disallowance under Section 14A shows that the appellant concedes that certain amount of expenditure was incurred in respect of earning the income. ...p....