TaxTMI 
TaxTMI 
2026 (4) TMI 1466
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..../Join Commissioner of Income-tax (Appeals)-1, Gurugram failed to appreciate that by upholding the disallowance of RS. 87,41,989 it was confirmed by him that for earning of the taxable income of Rs. 1,76,46,959 being 43.10 per cent of the total income earned from investments, the appellant had allegedly not incurred any expenditure. (3) That the appellant craves leave to add, modify or withdraw any Ground or Grounds of Appeal before or at the time of Hearing of the Appeal before the Hon'ble Income-tax Appellate Tribunal." 3. Brief facts of the case are that the assessee is a private limited company and had filed its return of income for AY 2017-18 declaring total loss of Rs. (-)1,03,10,740/-. The case was selected for limited scrutiny through Computer Assisted Scrutiny Selection (in short 'CASS') for the reason being computation/examination of expenses incurred for earning exempt income and notices u/s 143(2) and 142(1) of the Act were issued to the assessee. The Assessing Officer (hereinafter referred to as Ld. 'AO') made the addition by observing as under: "3. The issue on the basis of which the case was selected for limited scrutiny was co....
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....h is relatable to earning of income forming part of total income and it therefore follows that the expenses which are relatable to earning of exempt income have to be considered for disallowance, irrespective of the fact whether any such income has been earned during the financial-year or not. 7. The above position is further clarified by the usage of term 'includible' in the heading to section 14A of the Act and also in the Heading to Rule 8D of I.T. Rules, 1962 which indicates that it is not necessary that exempt income should necessarily be included in a particular year's income, for disallowance to be triggered. Also, section 14A of the Act does not use the word "income of the year' but "income under the Act'. This impliedly indicates that for invoking disallowance under section 14A, it is not material that assessee should have earned such exempt income during the financial year under consideration. With this view of the matter, the contention of the assessee is held to be not acceptable and in this case, therefore, section 14A read with Rule 8D are attracted. The computation of disallowable expenses u/s 14A read with Rule 8D is made hereunder: 8D2(i....
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....that where the AO having regard to the accounts of the assessee of a previous year is not satisfied with the correctness of the claim of the expenditure made by the assessee or with his claim that no expenditure has been incurred by him in relation to such income not forming part of the total income, the disallowable expenditure shall be computed in accordance with sub-Rule (2). The constitutional validity of both sub section 2 and 3 as well as Rule 8D has been upheld by the court in Godrej & Boyce Mfg Co. Ltd v DCIT 328 ITR 81 where it was held that Disallowance under section 14A has to be made in accordance with the principle laid down by the Hon'ble Bombay High Court in the present case. The Mumbai Tribunal in Daga Capital Management Pvt. Ltd. 26 SOT 603 held that all disallowances u/s 14A ought to be strictly computed as per Rule 8D. 4.1.3 It is seen from the assessment order that the AO proceeded to compute disallowable expenditure in accordance with the method prescribed only after recording his dissatisfaction that he is not satisfied with the claim of the assessee made in respect of disallowable expenditure in relation to income not forming part of the total in....
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....er section 36(1)(va) read with section 2(24)(x) of the Income-tax Act, 1961 on account of delayed deposit of employees' contribution towards PF/ESI without considering CBDT's Circular No. 22 of 2015 dated December 17, 2015 ? (ii) Whether on the facts and in the circumstances of the case the Learned Income-tax Appellate Tribunal, "C" Bench, Kolkata has erred in law in holding that the disallowances under section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 is to be in relating to the income which does not form a part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income while as per rule 8D, those investments are also to be taken income from which shall not form part of the total income ? 3. We have heard Mr. Debasish Chaudhuri, learned standing counsel appearing for the appellant/revenue. 4. The second substantial question of law framed for consideration is with regard to disallowance under section 14A of the Act read with rule 8D of the Income-tax Rules, 1962. We have perused the order passed by t....