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TMI Blog2016 (6) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... MEMBER 1. This appeal is filed by the assessee against the order of Ld. CIT(A)-XXIII New Delhi vide order dated 29.1.2014 on the following grounds : 1. (a)The Ld. Assessing Officer Ward 23(1) New Delhi has erred in law and on facts in making of disallowance of expenditure under section 14A of Income Tax Act, 1961 of ₹ 1,46,271/- without recording any satisfaction or relying on the evidence of expenditure so incurred on the scrutiny of the accounts. (b) Further the CIT(A) has further failed to appreciate that the assessee has not incurred any expenditure against the earning of exempted income and the expenditure can not be presumed as the entire investment has been made from the personal a/c of the appellant. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance was upheld. Assessee aggrieved by the order of CIT(A) has filed an appeal before us. 3. The first ground of appeal is that Ld. AO before making any disallowance u/s 14A applying Rule 8D has not recorded any satisfaction that there is no expenditure disallowable u/s 14A as claimed by appellant in his return of income. Ld. AR of the assessee submitted that now this issue is covered by the decision of Hon ble Delhi High Court in the case of Taikisha Engineering Pvt. Ltd. Therefore, the disallowance is not sustainable. 4. Ld. DR relied on the orders of the lower authority. 5. We have carefully considered the rival contentions. On reading of the assessment, order we do not find that AO has recorded any satisfaction on the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any assessment year beginning on or before the 1st day of April, 2001. Section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income under the Act. Under sub-section (2) of section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assessing Officer can determine the amount of expenditure which should be disallowed in accordance with such method as prescribed, i.e., rule 8D of the Rules (quoted and elucidated below). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro visions of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely :- (i) the amount of expenditure directly relating to income which does not form part of total income ; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accord ance with the following formula, namely :- A * B - C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the pre vious year ; B = the average of value of investment, income from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under sub-rule (2) to rule 8D of the Rules is to be made. 13. We need not, therefore, go on to sub-rule (2) to rule 8D of the Rules until and unless the Assessing Officer has first recorded the satisfaction, which is mandated by sub-section (2) of section 14A of the Act and subrule (1) of rule 8D of the Rules. 6. Respectfully following the decision of Hon ble Delhi High Court we are of the view that disallowance of ₹ 1,46,271/- made by the Ld. AO and confirmed by the Ld. CIT(A) as unsustainable. Hence we reverse the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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