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TMI Blog2022 (11) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income. Thus, when no claim has been made by the assessee for the allowance of these expenses that the disallowance so made by the Ld. AO is not warranted and it is directed that the same be deleted. Disallowance u/s 14A read with Rule 8D(2)(iii) - We note that the assessee had capital, reserve and surplus far exceeding investment made in securities yielding exempt income. We also note that Ld. AO has straightway applied Rule 8D(2)(iii) for the purpose of making a disallowance without complying with the requirements of Section 14A to record a satisfaction having regard to the books of account of the assessee. AO has not brought on record the proximate relationship between the expenditure and the tax exempt income. We note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Statutory notices were issued which were complied with by the assessee by filing and submitting the requisite details. Assessment was completed by the Ld. AO u/s 143(3) r.w.s 92CA of the Act wherein the following four additions/disallowances were made: i) Cessation of Liability u/s 41(1) Rs. 8,55,400/- ii) disallowance u/s 37 transportation charges Rs. 12,000/- capitalized iii) Disallowance u/s 37 donation debited to profit Rs. 44,550/- and loss account iv) Disallowance u/s 14A read with Rule 8D(2)(iii) Rs. 33,844/- 5. The assessee has placed on record paper book containing 71 pages along with detailed written submission to substantiate its claim in respect of addition/disallowance made by the Ld. AO. The four a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds transportation charges capitalized it was submitted that these charges were incurred by the assessee towards storage racks purchased from Presto Systems which has been duly capitalized to the asset under office equipment and forms part of the gross block of assets in the financial statement of the assessee. Relevant voucher and debit note are placed in the paper book. Ld. Counsel thus submitted that the assessee has never claimed this amount as an expenses in its profit and loss account and therefore the disallowance made by the Ld. AO is on absolute misconception of the facts and therefore ought to be deleted. iii) In respect of third issue which relates to the disallowance made in respect of donation debited in profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled position of law that unilateral right off in the manner which the Ld. AO has done cannot be sustained u/s 41(1) of the Act. In respect of second and third issue taken together, we note that it is an uncontroverted fact that assessee has never claimed these expenses in its return of income while reporting the total income. Thus, when no claim has been made by the assessee for the allowance of these expenses that the disallowance so made by the Ld. AO is not warranted and it is directed that the same be deleted. In respect of disallowance made u/s 14A read with Rule 8D(2)(iii), we note that the assessee had capital, reserve and surplus far exceeding investment made in securities yielding exempt income. We also note that Ld. AO has strai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment, the assessee could not have invested in the mutual funds. The Assessing Officer took the view that section 14A clearly applied to the assessee's case. The Assessing Officer accordingly invoked rule 8D and computed the disallowance at 0.5 per cent. of Rs.381,67,09,731, the average investment. Then, he disallowed Rs. 1,90,83,548. The assessee appealed to the Commissioner of Incometax (Appeals). Indeed, the appellate authority confirmed the Assessing Officer's disallowance. Of course, the Tribunal reversed it. Let us see whether the Tribunal's view is sustainable. 19. Here, on facts, the Tribunal noted that the. Assessing Officer only discussed the provisions of section 14A(1) but has not justified how the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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