2023 (11) TMI 31

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....ed in deleting the disallowance of Rs. 10,47,30,878/- made u/s 14A r.w Rule 8D without appreciating that the assessee did not establish the nexus between interest free funds and investment yielding exempt income. 2. On the facts and in the circumstances of the case the finding of Ld. CIT(A) is contrary to Rule 8D (ii) & (iii) of the Income Tax Rules." 3. Briefly stated, the assessee company is engaged in the business of engineering, procurement, construction and project management services. The assessee filed its return for AY 2015-16 on 28.11.2015 declaring loss of Rs. 875,39,91,399/-. Initially the case was selected for limited scrutiny through CASS but later on converted to complete scrutiny. Statutory notice(s) were issued/served in ....

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.... Rs. 10,47,30,878/- being interest expenses under section 14A r.w. Rule 8D and added it to the income of the assessee. Accordingly, the Ld. AO computed loss of Rs. 8,64,92,60,521/- as against claim of Rs. 8,75,39,399/- as per return in his assessment order dated 28.12.2018 under section 143(3) of the Act. 4. Aggrieved by the impugned disallowance under section 14A r.w. Rule 8D, the assessee appealed before the Ld. CIT(A). It was contended before him that the Ld. AO did not counter the submission of the assessee that no expense has been incurred and claimed for earning exempt income. The disallowance is made on the assumption that the provision of section 14A r.w. Rule 8D is automatic and mandatory even though no expenses have been incurred....

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....and (iii) of the Income Tax Rules, 1962. 7. The Ld. AR, on the other hand, supported the order of the Ld. CIT(A) and relied on the decision of Hon'ble Supreme Court in Maxopp Investment Ltd. vs. CIT (2018) 91 taxmann.com 154(SC) and South Indian Bank Ltd. vs. CIT (2021) 130 taxmann.com 178 (SC). 8. We have considered carefully the submission of the parties and perused the records. It is not in dispute that the assessee on its own made disallowance of Rs. 4,44,270/- under section 14A of the Act. It is observed that the Ld. AO has not recorded his satisfaction regarding correctness of self disallowance made by the assessee under section 14A as is mandatory in terms of sub-section (2) of section 14A to invoke and take recourse to Rule 8D. In....