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TMI Blog2016 (2) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly embarked on invoking Rule 8D(2) of the Rules. In our opinion, this action of the Learned AO is not in accordance with law. We hold that the satisfaction need to be recorded in terms of Rule 8D(1) by the Learned AO and not by the Learned CIT-A We also find lot of force in the alternative arguments of the Learned AR that only investments yielding exempt income should be considered for the purpose of disallowance u/s 14A read with Rule 8D of the Rules. - Decided in favour of assessee - ITA No. 465/Kol/2013 - - - Dated:- 13-1-2016 - Shri N.Vasudevan, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : Shri B.K Ghosh Pijush Dey, FCAs, ld.ARs For The Respondent : Shri S.S Alam, JCIT/Sr.DR ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee in relation to income which does not form part of the total income. In the assessment order, the Learned AO had not furnished the workings of arriving at the disallowance u/s 14A of the Act and no details of investments held by the assessee were spelt out by the Learned AO in the order. On first appeal, the Learned CIT(A) upheld the addition made by the Learned AO. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeals) - VI, Kol has erred in confirming the disallowances amounting to ₹ 12,24,192 under section 14A without bringing on record any cogent reasons for disregarding and rejecting the estimate inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s 14A of the Act to the tune of ₹ 4,67,484/- by adopting the following basis :- - The investment decision of the company was taken by the Managing Director , CEO and one Assistant Vice President of the company. Therefore a part of their salary has been considered as amount of expenses attributable to earning of exempt income. - Total salary paid to these persons during the financial year 2008-09 relevant to Asst Year 2009-10 amounted to ₹ 19,16,408/-. (A) - Total exempt income derived by the assessee is ₹ 1,79,76,596/- (B) - Total investments held by the assessee is ₹ 11,97,37,137/-. (C ) - Disallowance u/s 14A is worked out in the following manner:- (i) Salary paid to aforesaid persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said workings and without recording his satisfaction with cogent reasons as to why the said figure is incorrect, directly embarked on invoking Rule 8D(2) of the Rules. In our opinion, this action of the Learned AO is not in accordance with law. We hold that the satisfaction need to be recorded in terms of Rule 8D(1) by the Learned AO and not by the Learned CITA. We would like to place reliance in this regard on the following decisions :- CIT vs Ashish Jhunjhunwala in G.A.No. 2990 of 2013 in ITAT No. 157 of 2013 dated 8.1.2014 rendered by Calcutta High Court While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills Ltd vs CIT reported in 140 TTJ (Kol) 73 (Kolkata Tribunal) CIT vs Corrtech Energy Pvt Ltd reported in 352 ITR 97 (Guj) CIT vs Shivam Motors in ITA No. 88 of 2014 dated 5.5.2014 rendered by Allahabad High Court CIT vs Lakhani Marketing in ITA No. 970 of 2008 rendered by Punjab Haryana High Court CIT vs Delite Enterprises in ITA No. 110 of 2009 rendered by Bombay High Court The decision of special bench of Tribunal in the case of Cheminvest Ltd vs CIT reported in 121 ITD 318 had held that disallowance u/s 14A could be made even in an year in which no exempt income was earned or received by the assessee. But this decision has been overruled by Bangalore Tribunal , Gujarat High Court and Allahabad High Court as stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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