2016 (3) TMI 1101 - AT - Income Tax

Disallowance under section 14A r.w.r 8D - Held that - In the absence of requisite satisfaction recorded by the Assessing Officer showing how the disallowance offered by the assessee under section 14A was not correct having regard to its books of account it was not permissible to the Assessing Officer in law to invoke section 14A and make a further disallowance. We therefore uphold the impugned order of the ld. CIT(Appeals) deleting such disallowance made by the Assessing Officer under section 14A although on different grounds and dismiss this appeal of the Revenue. - Decided in favour of assessee

Summary

Issues:
Deletion of addition under section 14A of the Act read with Rule 8D of the Income Tax Rules.

Analysis:
1. The appeal was filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-IV, Kolkata related to the deletion of an addition made under section 14A of the Act read with Rule 8D of the Income Tax Rules. The appeal was disposed of along with Cross Objection filed by the assessee.

2. The main issue in the appeal was the deletion of an addition of &8377; 57.68 lakhs made by the Assessing Officer under section 14A of the Act read with Rule 8D of the Income Tax Rules. The assessee, a Non-Banking Finance Company, had initially claimed dividend income as exempt and offered a disallowance of &8377; 5.76 lakhs on related expenditure. However, the Assessing Officer applied Rule 8D and calculated a higher disallowance, resulting in the addition.

3. The ld. CIT(Appeals) deleted the addition after considering the submissions and material on record. The ld. CIT(Appeals) found that the Assessing Officer had not provided evidence that loan funds were used for investments, and the disallowance made by the assessee was in conformity with the law. The ld. CIT(Appeals) referred to relevant case laws supporting the assessee's position.

4. During the Tribunal hearing, the ld. D.R. supported the Assessing Officer's order, while the ld. Counsel for the assessee relied on the decision of a Coordinate Bench. The Tribunal observed that the Assessing Officer did not show dissatisfaction with the disallowance offered by the assessee under section 14A. Citing a previous decision, the Tribunal held that without recorded satisfaction by the Assessing Officer, no further disallowance could be made under section 14A.

5. The Tribunal upheld the order of the ld. CIT(Appeals) and dismissed the Revenue's appeal. The Cross Objection filed by the assessee was also dismissed as it became infructuous. Both the appeal of the Revenue and the Cross Objection were dismissed, and the decision was pronounced in open court on March 04, 2016.