TaxTMI 
TaxTMI 
2024 (6) TMI 1537
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....ellant had incurred & debited expenses to P&L which have direct nexus to the business of the appellant which cannot be disallowed u/s 14A r.w.r. 8D over and above sum already disallowed by the appellant. 3. The Learned CIT (A) ought not to have confirmed the disallowance of Rs. 33,20,874/-. 4. The disallowance of Rs. 33,20,874/- u/s 14A r.w. Rule 8D requires to be deleted. The appellant craves leave to add, amend, alter or modify its ground or grounds of appeal before the hearing." 3. Briefly stated the assessee is engaged in the business of Process and Project Engineering and caters to domestic and international markets and also provides design and engineering services. It filed its e-return for AY 2017-18 on 29.11.2017 declaring loss of Rs. 4,54,62,786/- but filed revised return on 27.03.2019 declaring income of Rs. 20,29,22,330/-. The case was selected for complete scrutiny and statutory notice u/s 143(2) of the Income Tax Act, 1961 (the "Act") was issued on 21.08.2018 which was duly served upon the assessee. During the assessment proceedings the Ld. Assessing Officer ("AO") found that the assessee had declared exempt dividend in....
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....-09, in case, the assessing officer is not satisfied with the correctness of the claim of the assessee, disallowance shall be computed as per Rule 80 of Income Tax Rules, 1962. 8. In the present case, the assessee has disallowed an amount of Rs. 51,41,522/- u/s 14A of the Act. A perusal of working given by the assessee suggests that the assessee has made disallowance on account of salary of 4 employees working in Treasury Department amounting to Rs. 49,41,522/-. Further, administrative expenses amounting to Rs. 2,00,000/- were also attributed towards earning of exempt income by stating that no real administration expenses were incurred by the company for making investments. On the other hand, the Assessing Officer in para 4.2 has mentioned that for making investment, substantial market research including the day-to-day analysis of market is required to be done. The assessing officer at page 8 of the assessment order has further mentioned that making of investments and earning of exempt income requires efforts and the administrative & other expenses are incurred by the assessee company to facilitate earning of exempt income. By observing above, the assessing ....
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....his dissatisfaction regarding computation of suo-moto disallowance made by assessee after examining accounts of assessee, AO was justified in rejecting ad hoc disallowance offered by assessee under section 14A and recomputing same as per rule 8D. 11. Considering the facts of the case, provisions of section 14A and above case-laws, the action of the assessing officer in computing the disallowance as per Rule 80 is upheld. The addition of Rs. 33,20,874/- made by the Assessing Officer is accordingly, confirmed." 5. The assessee, being dissatisfied with the confirmation by the Ld. CIT (A) of disallowance u/s 14A of the Act is before the Tribunal and all the grounds relate thereto. 6. At the very outset, that the Ld. AR drew our attention to point No. 20 of the assessee's reply dated 16.12.2019 submitted before the Ld. AO in response to his notice u/s. 142(1) dated 26.08.2019 containing therein the details of investments made; exempt income earned during the year; expenditure incurred during the year in required format; disallowance made by the assessee u/s 14A along with calculation and justification why the section 14A should not be applied in the case o....
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....) of section 14A mandates that the AO shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed if the AO, having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. The method of calculation is prescribed under Rule 8D of the Income Tax Rules, 1962. The application of Rule 8D of the Rules is subject to fulfillment of the condition precedent that the AO, having regard to the accounts of the assessee, is not satisfied with the correctness of the assessee's claim of such expenditure. 8.1 Perusal of the assessment order would show that the Ld. AO has not recorded his satisfaction having regard to the accounts of the assessee. He has applied Rule 8D to the case of the assessee as in his view if section 14A is attracted, the disallowance has to be made as per Rule 8D. However, this is not so. The Ld. AO has to be satisfied with the correctness of the claim of the assessee having regard to th....