TaxTMI 
TaxTMI 
2026 (7) TMI 394
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....e the following grounds of appeal, which are independent and without prejudice to each other: 1. Ground 1: Challenging the addition imputed applying the provisions of Rule 8D of the Income Tax Rules, 1962 1.1 The learned AO and the learned CIT(A) grossly erred in applying the provision of Rule 8D to compute expenses in relation to exempt income under the provisions of section 14A of the Act. 1.2 The learned AO and the learned CIT(A) ought to have appreciated that the disallowance computed by the Assessee is after considering attributable direct and indirect expenses (including obtaining a certificate for allocation of indirect cost) and is most reasonable having regard to the minimal efforts involved in making and maintaining investments yielding exempt income, which are in the nature of long-term debt securities. 2. Ground 2: Imputing addition under Rule 8D without recording objective satisfaction 2.1 The learned AO and the learned CIT(A) has grossly erred in imputing disallowance as per Rule 8D without recording objective satisfaction as per the mandate of the provisions of section 14A(2) of the Act. 2.2 The learned AO and the....
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....ng the disallowance u/s. 14A @1% of the Annual average of the monthly average of the opening and closing balances of the value of investment income and calculated the same at Rs. 2,43,81,472/-. Further, ld. Assessing Officer gave the benefit of suo motu disallowance of indirect expenses at Rs. 6,62,352/- against the disallowance calculated under Rule 8D(2)(ii) of the At and concluded the assessment proceedings making disallowance u/s. 14A at Rs. 2,37,19,120/- and assessed the income at Rs. 118,76,54,060/-. 6. Aggrieved assessee preferred appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal. 7. Ld. Counsel for the assessee vehemently argued referring to summary of key facts which also included the issues raised against non-recording of satisfaction which has not pressed during the course of hearing : 8. On the other hand, ld. DR supported the order of ld.CIT(A). 9. We have heard the rival contentions and perused the record placed before us. The common issue raised for A.Y. 2018-19 and 2020-21 is against the disallowance u/s. 14A of the Act. Though the assessee has referred to the decision of the Tribunal dealing with iss....
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.... for the indirect expenses incurred for earning the exempt income, ld. Jurisdictional Assessing Officer is directed to calculate @1% of the Annual average of the monthly average of the opening and closing balances of the value of investments excluding the investments made in Mutual Funds and Tax Free Bonds. Details to this effect for proper and correct calculation shall be placed by the assessee before the ld. JAO for necessary verification for which reasonable opportunity of hearing shall be provided to the assessee. 13. We also want to make it clear that in case the calculation under Rule 8D(2)(ii) of the I.T. Rules does not exceed the suo motu disallowance of indirect expenses made by the assessee, then no further disallowance deserves to be made under Rule 8D(2)(ii) of the I.T. Rules and in case it exceeds then the assessee should be allowed the deduction for the indirect expenses suo motu offered for disallowance. We order accordingly and allow Ground No.3 for statistical purpose. Appeal of the assessee for A.Y. 2018-19 is partly allowed for statistical purposes. 14. Now we take up ITA No.436/PUN/2026 for A.Y. 2020-21. Since facts and issues are identical to that ITA No.....
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....bited to P&L account with relation to exempt income appeared to be very less in comparison to investments made to earn exempt income." [Refer Para 3.5; Page (internal) 3 to 4 of the assessment order]: . The suo motu disallowance of INR 31.49 lakh is not commensurate with the magnitude of investments (INR 319.91 crore), because the assessee has not kept the funds in separate accounts in the process of utilization, but the same is mixed & in a general pool of funds. · The assessee has not been able to demonstrate whether the cash flow has been utilized to incur expenses in relation to exempt income or taxable income. · Section 14A includes that the assessee has to allocate both direct & indirect expenses for the exempt income, which has not been done & in absence of the same, the disallowance has to be calculated based on Rule 8D. · The expense computation is unsupported by documentary evidence such as invoices and ledgers. . The disallowance is "The submission of the assessee is studied, however the calculation of expenses pertaining to exempt income as per section 14A read with Rule 8D of the Income Tax Act submitted by the assessee does not seem to be justified." dispr....