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TMI Blog2021 (1) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... n expenses debited to profit loss account and exempt income earned for the year. Unless AO records satisfaction having regard to books of accounts that suo moto disallowance or no disallowance made by the assessee is not correct and he cannot proceed to compute disallowance u/s.14A - As in MAXOPP INVESTMENT LTD. [ 2018 (3) TMI 805 - SUPREME COURT] has considered the issue of satisfaction in the above case and held that where the AO is not satisfied with suo moto disallowance made by the assessee having regard to books of accounts that suo moto disallowance made by the assessee is not correct, he cannot invoke provisions of Rule 8D of the Rules. In this case on perusal of facts available on record, we find that the AO has recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATHA, AM: These two appeals filed by the assessee are directed against separate but identical orders of the Commissioner of Income Tax (Appeals)-7, Chennai, dated 21.02.2019 and pertains to assessment years 2013-14 2014-15. Since the facts are identical and issues are common, for the sake of convenience these appeals are heard together and are being disposed of by this consolidated order. 2. The assessee has more or less raised common grounds of appeal for both the assessment years. Therefore for the sake of brevity, grounds of appeal filed for assessment year 2013-14 are reproduced as under:- 1. The learned Commissioner of Income-tax (Appeals) erred in sustaining the disallowance made u/s 14A read with Rule 8D(2)(iii) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny and during the course of assessment proceedings AO noticed that the assessee has received dividend income of ₹ 1,83,81,799/- and claimed the same as exempt u/s.10(34) of the Income Tax Act, 1961 (hereinafter the Act ), however not made any suo moto disallowance towards expenditure in relation to exempt income u/s.14A of the Act. Therefore the AO called upon the assessee to explain as to why expenses in relation to exempt income shall not be computed u/s.14A r.w.rule 8D of the Income Tax Rules 1962 (hereinafter the Rules). In response, the assessee submitted that he has not incurred any expenditure for earning dividend income. The expenditure claimed against professional income was related to his professional activity and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest expenditure is relatable to exempt income because the assessee has taken loan and paid interest during the current financial year, whereas investments in shares were made in earlier financial years, when he was in employment. 5. As regards disallowance of expenses under Rule 8D(2)(iii) of the Rules, the ld.CIT(A) after considering working filed by the assessee directed the AO to exclude investments which do not yield exempt income for the purpose of computation of average value of investments, however rejected the arguments of the assessee that he did not incur any expenditure for earning exempt income. Accordingly directed the AO to verify the computation filed by the assessee and delete excess disallowance made u/s.8D(2)(iii) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice Sam P. Bharucha in ITA No.3889/Mum.2011 4) Delhi High Court in the case of CIT vs. Om Prakash Khaitan in ITA No.416 of 2015. 7. The ld.DR on the other hand supporting the order of ld.CIT(A) submitted that the issue is covered against the assessee by the decision of the ITAT Chennai D Bench in the assessee s own case for the assessment year 2012-13, where the Tribunal has rejected arguments of the assessee that no expenditure has been incurred in relation to exempt income in light of the provisions of Section 14A of the Act, that disallowance contemplated u/s.14A of the Act is a deeming fiction where a question of incurring actual expenses does not arise and what is relevant is income which do not form part of total income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Hon ble Supreme Court has considered the issue of satisfaction in the above case and held that where the AO is not satisfied with suo moto disallowance made by the assessee having regard to books of accounts that suo moto disallowance made by the assessee is not correct, he cannot invoke provisions of Rule 8D of the Rules. In this case on perusal of facts available on record, we find that the AO has recorded satisfaction as required u/s.14A(2) of the Act and applied Rule 8D(2) of the Rules to compute disallowance. Therefore the arguments taken by the assessee that no satisfaction is recorded by the AO is rejected. We further note that the Tribunal had already considered the issue for earlier assessment year in assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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