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TMI Blog2017 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... ic plea that it has not incurred any expenses to earn the exempt income from mutual funds and that the assessee has itself made disallowance to the tune of ₹ 1,00,000/- which has been accepted by the AO without pointing out any defect, provisions contained u/s 14A read with Rule 8D cannot be invoked. Because sub-section (2) & (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. Therefore the addition made by the AO and affirmed by the ld. CIT (A) is not sustainable. - Decided in favour of assessee. - ITA No.5551/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the Ld AO to delete the additions in the interest of justice. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : During the scrutiny proceedings, Assessing Officer noticed that the assessee company has claimed exempt income on account of dividend to the tune of ₹ 21,82,971/- under section 10(34) of the Income-tax Act, 1961 (for short the Act ). AO by invoking the provisions contained u/s 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 (for short the Rules) worked out the disallowance to the tune of ₹ 3,11,355/- (Rs.4,11,355/- minus ₹ 1,00,000/-) by making following observations :- 3.3 The reply of the assessee company has been considered and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NIL Disallowance of Interest cost under Clause (II) A X B 0 X 10,28,09,400 A X B 0 X 10,28,09,400 28,73,99,310 C NIL Working of Average Investments and Assets (As per Balance sheet) as per Rule 8D of the Income Tax Rules 1962. S.No. 31.03.2011 31.03.2010 Average Value (B) Investments ** 3,62,70,907 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT in ITA No.548/2015 dated23.08.2017 and Godrej Boyce Manufacturing Company Ltd. vs. DCIT 394 ITR 449 (SC). 6. Ld. DR for the Revenue challenging the impugned order contended inter alia that the AO has worked out the disallowance under Rule 8D as per accounts rendered by the assessee having been duly explained at the page 3 of the assessment order; that section 114 of the Evidence Act, 1872 raises presumption in favour of the Revenue that there was non-satisfaction of the AO and relied upon the order of the AO and relied upon the decisions rendered by Hon ble Apex Court in Mak Data Pvt. Ltd. vs. CIT 2013- TIOL-58-SC-IT and CIT vs. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) . 7. Undisputedly, the AO, without po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination, as earlier prevailing, would become applicable. 9. Hon ble Delhi High Court in HT Media Limited (supra) decided the issue in controversy in favour of the assessee by returning the following findings :- 39. Turning now to the order of the ITAT in para 33, it recorded the submission of the AR that the AO did 1)0t record any satisfaction about the Assessee not properly offering expenditure incurred in relation to the exempt income at ₹ 3 lakhs. The ITAT reproduced the contents of para 3.3.1 of the assessment order, which has been extracted by this Court hereinbefore, which contains general observations regarding earning of exempt income. This cannot be accepted as a recording by the AO of satisfaction regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from mutual funds and that the assessee has itself made disallowance to the tune of ₹ 1,00,000/- which has been accepted by the AO without pointing out any defect, provisions contained u/s 14A read with Rule 8D cannot be invoked. Because sub-section (2) (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. 11. AO has invoked provisions contained u/s 14A read with Rule 8D in mechanical manner without pointing out that such and such expenses have been incurred by the assessee. Furthermore, in the similar set of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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