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TMI Blog2015 (8) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in this regard. (Maxopp Investment Ltd. v. CIT (2011 (11) TMI 267 - Delhi High Court ). The ld CIT(A) has rightly observed that the AO did not find any deficiency in the books of account nor any deficiency in respect of the claim of the assessee u/s 14A of the Act. We also find that the AO has not expressed satisfaction with the assessee's claim u/s 14A was incorrect and which is a sine quo none before invoking provisions of section 14A of the Act. We do not find any infirmity whatsoever in the reasoned order passed by the ld CIT(A) and therefore we are inclined to confirm the order of the ld CIT(A) - Decided in favour of assessee. - ITA No. 1389/Del/2013 - - - Dated:- 13-2-2015 - S. V. Mehrotra, AM And A. T. Varkey,J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company under consideration are held not for the purposes of trading but for the purposes of management control. The assessee, in view of the provisions of section 14A of the Act voluntarily disallowed expenditure of ₹ 2,32,27,892/- incurred as the income earned. 4. However the AO did not agree to the disallowance made by the assessee in respect to its earned exempt income. Thereafter he made the following observation before disallowing ₹ 2,57,62,256/- in place of the assessee's voluntary disallowance of an amount of ₹ 2,32,27,892/-. From the reading of the above, provisions of aforesaid sections are clearly attracted in this case. During the assessment proceedings assessee was asked to give calculation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, evidences and records of the appellant and verified the voluntary disallowance by appellant u/s 14A of the Act. The AO has not pointed out any deficiency in the books of accounts nor in respect of claim of the appellant u/s 14A of the Act. In other words, the AO has not expressed satisfaction that the appellant's claim u/s 14A is incorrect, a prerequisite for invoking the provisions of section 14A of the Act. The Hon'ble Delhi High court in the case of Maxxop Investment Ltd. Vs. CIT (2012) 347 ITR 272 has held that :- the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. Having considered the rival submissions and after carefully perusing the records, we find that the AO without recording his satisfaction that the claim of expenditure in relation to tax free income has not been correctly made by the assessee as envisaged under section 14A(2) has invoked Rule 8D. Sub-section (2) of section 14A of the Act provides the manner in which the AO is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. The requirement of the AO embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the AO returns a finding that he is not satisfied with the correctness of the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard. (Maxopp Investment Ltd. v. CIT (2012) 397 ITR 272 (Del.). 7. In the light of the above well settled law, the ld. CIT(A) has rightly stated that the conditions before invocation of rule 8D which is reproduced below:- i. The AO should be satisfied that the claim of expenditure in relation to tax free income has not been correctly made by the assessee having regard to his accounts. ii. The AO should be recording his satisfaction as to how the assessee's calculation is incorrect. iii. Even where the assessee's claim that no expenditure has been incurred in relation to income which does not form part of total income, the assessing officer will have to verify the correctness of such claim. iv. In case, the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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