2025 (8) TMI 54

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....Appeals) in restricting the disallowance u/s 14A read with Rule 8D to the exempt income of Rs. 2,29,417/- received by the assessee during the year under consideration as against Rs. 8,00,07,137/- disallowed by the Assessing Officer. In the cross objection the assessee contended that the disallowance u/s 14A read with Rule 8D cannot be made on the basis of investment that do not yield any exempt income. It was also contended that no disallowance under 14A can be made in the absence of any expenditure incurred for any tax free income. In the cross objection the assessee also contended in ground no.1(iii) that no satisfaction recorded by the AO as to the contention of the assessee that having not incurred any expenditure for earning tax free i....

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....s been incurred in relation to income which does not form part of total income under the Income Tax Act, 1961. Therefore, disallowance of expenses in relation to income which don't form part of total income is computed as per the provisions of subsection (2) of the section 14 read with Rule 8D of the Income Tax Rules, 1962." 4. On appeal the Ld. CIT(A) accepting the alternative contention of the assessee that even if disallowances were to be made it should not exceed exempt income the Ld.CIT(A) restricted the disallowance to the exempt income of Rs. 2,29,417/- earned by the assessee. 5. In the cross objection the primary contention of the assessee is that the disallowance u/s 14A read with Rule 8D cannot be made on the basis of investment....

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....rrent assessment year, we noticed that there was no suo moto disallowance made by the assessee u/s 14A towards expenditure incurred for earning exempt income during the current assessment year. On perusal of the assessment order, we noticed that the AO on examination of the audited financials of the assessee and considering the replies furnished by the assessee, recorded that he is not satisfied with the replies furnished by the assessee. Since the assessee had not made any suo moto disallowance there was no occasion for the AO to examine the expenditure incurred for earning exempt income. Therefore, the contention of the assessee that no satisfaction has been recorded is apparently not correct as the AO considered the reply and examined th....