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TMI Blog2020 (10) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... ief No. 1 The Commissioner of Income-tax (Appeals)-56, Mumbai [hereinafter referred to as "the CIT(A)"] erred in holding that provisions of section 14A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") are applicable with respect to interest received by the branch of the appellants from its HO having failed to appreciate that interest received from HO is not exempt income. 2. Without prejudice to (1) above, the CIT(A) erred in not appreciating that since the bank had not incurred any expenditure for the purpose of earning the interest amount, provisions of section 14A are not applicable. 3. Without prejudice to ground nos. 1 and 2, the CIT(A) erred in upholding the action of AO of applying the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen from the records that the assessee has neither, filed any objections before the Ld. DRP, nor has intimated the Ld. AO about the acceptance of variation in draft assessment order, within the period specified in sub-section (2) of section 144C of the I.T.Act, 1961. Therefore, the Ld. AO has passed final assessment order on 29/05/2015 u/s 143(3) r.w.s. 144C(3) of the I.T.Act, 1961 and determined total income at Rs. 'Nil' after making additions towards TP adjustment as suggested by the Ld.TPO and additions towards disallowances u/s 14A r.w.Rule 8D of I.T.Rules, 1962 amounting to Rs. 88,551/-. 4. Being aggrieved by the assessment order, the assesee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assesee has challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next and final issue that came up for our consideration from ground No.2 & 3 of assessee appeal is disallowances u/s 14A of the Act, r.w.Rule 8D(2) of I.T. Rules, 1962. The Ld. AO has disallowed an amount of Rs. 88,551/- towards interest expenditure under Rule 8D(2)(ii) and other expenses @0.5% of average value of investments under Rule 8D(2)(iii) of I.T.Rules, 1962. 7. The Ld. AR for the assessee submitted that the Ld.CIT(A) has erred in not appreciating that since, the bank had not incurred any expenditure for the purpose of earning interest amount, provisions of section 14A are not applicable. The Ld. AR, further submitted that if at all provisions of section 14A is applicable, even otherwise, there could not be any disallowances under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, we find that the question of recording satisfaction comes into play only, when the assessee has made suo-moto disallowance u/s 14A, but such disallowances has not been accepted by the Ld. AO. In such eventuality, the Ld. AO has to record clear satisfaction as required u/s 14A(2) of the Act, having regard to books of accounts of the assessee that suo-moto disallowances computed by the assessee is incorrect. In case, there is no suo-moto disallowances from the assessee, then the requirement of recording satisfaction as required under law does not arise and the Ld. AO can invoke provisions of section 14A of the Act, with reference to Rule 8D of I.T. Rules, 1962 to compute disallowances of expenditure in relation to exempt income. This l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider net interest expenditure for the purpose of working out disallowances of interest under Rule 8D(2)(ii) of I.T.Rules, 1962. As regards other expenditure, although the assesee has requested for disallowances of 1% to 2% of exempt income, but from AY 2008-09 onwards disallowances contemplated u/s 14A shall be computed in accordance with Rule 8D, where the procedure has been laid down for determination of disallowances of expenditure and this principle is supported by the decision of Hon'ble Bombay High court in the case of CIT vs Godrej and Boyce Manufacturing Co.Ltd. (2010) 328 ITR 81(Bombay). Therefore, we are of the considered view that there is no merit in arguments taken by the assesee and hence, we are inclined to uphold the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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