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2019 (10) TMI 466 - AT - Income TaxDisallowance u/s 14A read with rule 8 D - non recording of proper satisfaction - HELD THAT - Assessee has specifically stated that it has not incurred any expenditure to earn exempt income. The assessee further submitted before the AO the details of each and every expenditure out of ₹ 1118354/- which has been debited in the books of account. The nature of expenditure shown by the assessee in the income and expenditure clearly shows that the major expenditure is of donation of ₹ 801000/- and deprecation of ₹ 1,99,694/-. All other expenditure in the form of insurance, books, audit fees, subscription and telephone etc , each of them being less than ₹ 20000/- was claimed. AO without pointing out any instance of expenditure incurred by the assessee with regard to books of account of the assessee, adopted the disallowance computation u/r 8D of the IT Rules. Ld AO could not show that any of the expenditure is incurred for earning exempt income. Claim of the assessee that he has not incurred any expenditure for earning exempt income is correct. AO did not dispute this fact but applied the provisions of Rule 8D of the Income Tax Rules, 1962. Satisfaction is not the proper satisfaction recorded by the ld AO for invoking Rule 8D. Further, the ld CIT (A) also did not appreciate this argument in proper perspective and erroneously held that ld AO has correctly recorded the satisfaction. Further ld CIT (A) has also confirmed the addition merely because the assessee has accepted the order of the ld CIT (A) for earlier years. According to us merely on this basis, disallowance cannot be confirmed in this year. There may be innumerable reasons with the assessee to not to agitate an issue in one year but to agitate it in another year. Merely that cannot be a ground to confirm the disallowance. Accordingly, we direct the ld AO to delete the disallowance u/s 14A of the Act read with Rule 8D - Decided in favour of assesee.
Issues Involved:
- Disallowance u/s 14A read with Rule 8D of the Act of ? 234213/- - Upholding levy of interest under section 234C of the Act Analysis: Issue 1: Disallowance u/s 14A read with Rule 8D of the Act of ? 234213/- The assessee appealed against the order of the ld CIT(A) upholding the disallowance of ? 234213 made by the assessing officer under section 14A of the Income tax Act, 1961, read with Rule 8D of the Income Tax Rules, 1962. The assessee contended that no expenditure was incurred for earning exempt income and challenged the satisfaction of the ld AO. The ld AO had made the disallowance based on Rule 8D without specifically identifying any expenditure related to earning exempt income. The Tribunal noted that the major expenditure claimed by the assessee was for donation and depreciation, which were not allowable expenses for disallowance under section 14A and Rule 8D. The Tribunal held that the satisfaction recorded by the ld AO was not proper as it did not address the specific claim of the assessee regarding the absence of expenditure for earning exempt income. The Tribunal further criticized the ld CIT(A) for confirming the addition based on the assessee's acceptance of earlier orders, stating that mere acceptance in previous years cannot be a ground for confirming disallowance. Consequently, the Tribunal directed the ld AO to delete the disallowance of ? 234213 made under section 14A of the Act read with Rule 8D, reversing the lower authorities' decision. Issue 2: Upholding levy of interest under section 234C of the Act The Tribunal did not provide a detailed analysis of this issue in the judgment. No specific arguments or contentions were mentioned regarding the levy of interest under section 234C of the Act. Therefore, it can be inferred that this issue was not extensively discussed in the judgment, and the Tribunal did not find it necessary to provide a detailed analysis or reasoning for upholding the levy of interest under section 234C of the Act. In conclusion, the Tribunal allowed the appeal of the assessee concerning the disallowance under section 14A read with Rule 8D of the Act, highlighting the lack of proper satisfaction by the ld AO and the erroneous confirmation by the ld CIT(A) based on previous acceptance. The judgment did not delve into the issue of upholding the levy of interest under section 234C of the Act, indicating that it was not a significant point of contention in the case.
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