2019 (4) TMI 190 - AT - Income Tax

Addition u/s 14A read with rule 8D - assessee is having investments and earned dividend income which is exempt from tax - assessee has not shown any expenditure incurred - recording of satisfaction of AO - HELD THAT - Assessee reiterated that there is no satisfaction by the A.O. that the assessee has not incurred any expenditure to earn the exempt income. In this regard, he placed reliance on several Tribunal decision in this regard. As regards the tribunal s decision referred by the assessee, we find that they were rendered on the facts of the case, with a finding that there was no whisper by the A.O. regarding his satisfaction that the assessee has incurred expenditure to earn exempt income. In the present case, we find that it is not a whisper but a categorical finding and satisfaction of the A.O. that expenditure has been incurred to earn the exempt income. In our considered opinion, the CIT(A) s finding to this effect is devoid of any infirmity. Except for calling the categorical satisfaction of the A.O., absence of satisfaction, the ld. Counsel of the assessee has not made out any case to negate the disallowance u/s. 14A. Hence, in the background of the aforesaid discussion, we do not find any infirmity in the order of the authorities below. Hence, we uphold the same. - Decided against assessee.

Summary

Issues:
1. Disallowance under section 14A read with rule 8D of the Income Tax Rules 1962.
2. Assessment of administrative expenditure on investments for income not forming part of total income.
3. Recording of satisfaction by Assessing Officer (A.O.) regarding expenditure incurred to earn exempt income.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) pertaining to the disallowance made under section 14A read with rule 8D. The Assessing Officer observed investments earning exempt dividend income without any expenditure shown. The assessee contended no administrative expenses were incurred due to mutual fund investments. However, the A.O. disagreed, stating decision-making, issuing cheques, and accounting led to administrative expenses. Consequently, a disallowance under Rule 8D was calculated.

2. The A.O. computed the disallowance based on the formula under Rule 8D, considering the average value of investments. The disallowance was upheld in the assessment order, leading to the appeal. The assessee argued the A.O. did not record satisfaction of no expenditure for tax-free income. The CIT(A) rejected this, affirming the A.O.'s satisfaction. The Tribunal found no infirmity in the CIT(A)'s decision, upholding the disallowance under section 14A.

3. The Tribunal noted the A.O.'s categorical finding and satisfaction regarding expenditure incurred for exempt income. While the assessee cited tribunal decisions on lack of A.O.'s satisfaction, the Tribunal distinguished those cases. It concluded that the A.O. had satisfactorily established the expenditure incurred for earning exempt income. As the assessee failed to challenge this satisfaction effectively, the disallowance under section 14A was upheld, and the appeal was dismissed.