TaxTMI 
TaxTMI 
2026 (8) TMI 763
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....ed in upholding the additional disallowance of Rs. 57,28,869/- made by the Assessing Officer under section 14A r.w rule 8D in respect of the exempt income. 2. The CIT (Appeals) failed to appreciate that the Assessing Officer had invoked provisions of section 14A(2) without examining the claim of the appellant and having regard to the account of the appellant. 3. The CIT (Appeals) erred in not appreciating that the learned AO had failed to give valid and cogent reasons for his dissatisfaction and applying Rule 8D. 4. Without prejudice to the above, the CIT (Appeals) erred in confirming the recalculation of disallowance under section 14A done by the learned Assessing Officer. 5. The CIT(Appeals) failed to a....
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.... does not form part of total income. The expenditure includes possible overhead expenses. The disallowance computed is correct and does not require any further adjustment. The reply of assessee was not accepted by AO. The AO invoked the provision of Rule 8D and computed disallowance under Rule 8D(2)(i) as Nil and under Rule 8D(2)(ii) @ 1.00% of annual average of monthly average of investment made for the purpose of earning exempt income. The AO worked out total disallowance under section 14A of Rs. 66,45,833/-. The AO allowed set off of suo moto of Rs. 9,16,964/- and thereby worked out a net disallowance under section 14A of Rs. 57,28,869/- in the assessment order dated 16.03.2021. 3. Aggrieved by the additions in the assessment order, t....
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....is scheme cannot be considered for disallowance under section 14A. So far as other investment in debt fund with dividend option, dividend declared by the scheme does not form part total income. When the units of these schemes are redeemed, the resultant gain is chargeable to tax. Thus, the investments in these schemes yield both taxable income as well as income which do not form part total income. This fact was brought in the notice of AO that there were only three transactions in mutual fund and two transactions of fresh investment were in respect of investment in debt fund with growth option. There was one transaction of redemption of mutual fund that is Reliance Liquidity Fund with dividend option with a small capital loss of Rs. 2,81,97....
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....d. AR of the assessee submits that these investments may be categorised in five categories. First, relates to HDFC Cash Management Fund (Growth), second relates to ICICI Prudential Liquid Plan (Weekly Dividend Payout), third relates to Reliance Liquidity Fund (Weekly Dividend Payout), fourth relates to ICICI Prudential Liquid Fund (Growth Plan) and fifth with regards to HDFC Money Market Fund (Regular Growth Plan). From 4 & 5 items, no dividend income is received. Thus, those investments cannot be considered for monthly average of annual average of investment. Otherwise, the assessee has already disallowed 25% of salary of one employee who is looking after such investment. The ld. AR of the assessee submits that disallowance made by suo mot....
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.... been recorded by us in preceding paras of this order. We have already recorded the manner of disallowance under Rule 8D by AO. Before us, the ld. AR of the assessee made vehemently argued that no satisfaction is recorded by AO about the correctness of suo moto disallowance. We find that AO in para 4 of his order has recorded that suo moto disallowance by assessee is not in accordance with Rule 8D. We find that no specific reference is made about the accounts of the assessee before rejecting the contention of assessee. We find that subsection (2) of section 14A mandates that AO shall determine the amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with the method a....