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TMI Blog2018 (5) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... en her estimation and ;opinion which has no validity in the eyes of the law. 3. The Ld.CIT(A) had failed to appreciate that in the absence of nexus between the expenditure incurred and exempted income and adverse action u/s 14A is not justified." 3. The assessee company is engaged in the business of Consultancy Services during the year. The assessee company filed its return for Assessment Year 2014-15 on 31/3/2016 declaring income of Rs. 18,74,290/-. Statutory notice u/s 143(2) of the Income Tax Act, 1961 dated 26/07/2016 was issued along with notice u/s 142(1) and served upon the assessee. In response to the said notices, C.A and Authorized Representative of the assessee company attended the assessment proceedings and filed the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is not agree to such expenses surrendered by the assessee then Rule 8D be invoked to determine the expense incurred to turn exempted income. Thus, it is evident that Rule 8D will be applicable where an expense apparently is not established. However, the Assessing Officer cannot take both the options simultaneously. In the instant case, the Assessing Officer added Rs. 1,28,954/- by linking as direct expenses as taxable income. Thus, his right to apply Rule 8D deserves to be seized or to say such order ceases its validity. The Ld. AR further submitted that recording of satisfaction by Assessing Officer for applicability of Section 14A is mandatory. It is an admitted fact in assessment order that neither there is any investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was correctly applied by the Assessing Officer. The Ld. AR submitted that this observation is contrary to the factual aspect as from Note No. 18 forming the part of balance sheet related to administrative and general expenses for an aggregate amount of Rs. 21.41 lacks does not include any expenses which could have linked up with tax free income. Thus, the Assessing Officer as well as the CIT(A) has not proved nexus of any expense in respect of dividend income. 6. The Ld. DR submitted that the CIT(A) has rightly taken a view that disallowance is provided u/s 14A read with Rule 8D (2)(iii) as the Assessing Officer has correctly determine the amount in direct expenditure (Rs.5,89,439/-) strictly in accordance with formula prescribed in Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure like interest or any related expense were claimed. Thus, the application of proviso to Section 14A does not come in the picture. Besides the satisfaction is a necessity for invoking Section 14A which the Assessing Officer has over looked. Merely, calculating as per Rule 8D for disallowance u/s 14A does not allow the Assessing Officer to escape from recording the satisfaction. It is a mandatory condition of Section 14A to refer satisfaction as to why disallowance u/s 14A has to be done. In the entire assessment order, the Assessing Officer has not given a nexus between the investment and expenses incurred thereto. The Hon'ble High Court in case of H. T. Media Limited held that for the purpose of Rule 8D (2)(ii), the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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