2021 (9) TMI 1077 - AT - Income Tax

Disallowance u/s.14A read with Rule 8D - Mandation of recording satisfaction - disallowance in respect of expenses incurred for earning the exempt income - Assessee argued AO not recording satisfaction before making addition - HELD THAT - AO noted the assessee's explanation that the company had not incurred any expense in relation to earning exempt income and found the same to be unacceptable by finding that maintaining portfolios do require constant monitoring and control and incidental expenses are incurred. Thereafter, the AO observed that there was no one to one correlation with regard to the expenditure vis- -vis the exempt income, i.e. dividend . In view of the above overwhelming satisfaction recorded by the AO as to the correctness of the assessee's claim in this regard, we are not impressed with the ld. AR's submission that the AO did not record satisfaction in terms of section 14A(2) of the Act. As decided in own case 2018 (11) TMI 1869 - ITAT PUNE ITAT has restored the matter of section 14A disallowance to the file of AO with certain directions. In reaching this conclusion, the Tribunal relied upon its order in the assessee's own case for the assessment years 2008-09 to 2011-12 - On merits, we set-aside the impugned order and remit the matter to the file of AO for computing the disallowance u/s. 14A in the hue of the directions given by the Tribunal in its order for the assessment years 2008-09 to 2011-12.

Summary

Issues:
1. Disallowance of expenses under section 14A of the Income-tax Act, 1961 for assessment years 2013-14 & 2014-15.

Analysis:
A.Y. 2013-14:
The issue in this appeal pertains to the disallowance of &8377; 65,14,825 under section 14A of the Income-tax Act, 1961. The assessee received dividend income and claimed it as exempt u/s. 10(34) of the Act. The Assessing Officer (AO) computed the disallowance under rule 8D(iii) at &8377; 65,14,825. The contention was that the AO did not record proper satisfaction as required by section 14A(2) of the Act. The Tribunal found that the AO had properly satisfied the conditions for disallowance. The Tribunal referred to previous orders and remitted the matter back to the AO for fresh consideration in line with earlier directions.

A.Y. 2014-15:
In this appeal, the AO disallowed &8377; 77,66,770 under section 14A read with rule 8D(2)(iii). The facts were similar to the previous year. The AO recorded satisfaction for disallowance u/s. 14A. The Tribunal set aside the order and remitted the matter back to the AO for computation of disallowance in accordance with directions from previous years.

In both cases, the Tribunal found that the AO had properly satisfied the conditions for disallowance under section 14A. The matters were remitted back to the AO for fresh consideration in line with earlier directions. The appeals were partly allowed for statistical purposes in both assessment years.

The judgments were pronounced on 17 September, 2021.