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TMI Blog2022 (12) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... vailing, would become applicable. The said principle has been reiterated in the case of Marg Limited [ 2020 (10) TMI 102 - MADRAS HIGH COURT] - Further in Maxopp Investment Limited [ 2018 (3) TMI 805 - SUPREME COURT] observed that it is that expenditure alone which has been incurred in relation to the income which is not includible in total income, is to be disallowed. If expenditure has no casual connection with the exempt income, such expenditure would be an allowable expenditure. Applying the ratio of aforesaid principles as well as the consistent view of Tribunal in assessee s own case as cited before us, we would hold that since AO has mechanically applied the provisions of Rule 8D while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year, such disallowance is not sustainable in law. Accordingly, Ld. AO is directed to delete the additional disallowance while computing income under normal provisions as well as while computing Book profits u/s 115JB. - ITA No. 2080/Chny/2019 - - - Dated:- 6-12-2022 - HON BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON BLE SHRI MANOJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4. We find that Ld. CIT(A) has relied upon first appellate order for AY 2014-15 which stood reversed by Tribunal in ITA Nos. 3168/Chny/2018 dated 18.02.2022 as under: - 5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including the case law relied on by the assessee. In this case, the assessee is engaged in the business of investment promotion and during the year, the assessee has earned dividend income of ₹.17,10,42,084/-. In the return of income, the assessee has suo motu disallowed ₹.8,000/- under section 14A of the Act. However, the Assessing Officer disallowed an additional amount of ₹.34,28,05,564/-. However, while making additional disallowance under section 14A of the Act, the Assessing Officer has not recorded any satisfaction as to how the claim of the assessee was incorrect and had resorted to the provisions under section 14A r.w. Rule 8D. By relying upon decision of the Tribunal in assessee s own case for the assessment year 2013-14, wherein, the decision in the case of Maxopp Investment Ltd. v. CIT (supra) has been followed, the ld. Counsel for the assessee has pray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the Assessing Officer . Recently, the Co-ordinate Bench of the Tribunal to which one of us i.e. the Accountant Member is the author of the order, in the case of City Union Bank Ltd vs. Assistant Commissioner of Income Tax, (2019) 74 ITR Trib (644) Chennai held as follows:- As regards to other limb of the argument of the assessee that in the absences of any finding by the Assessing Officer as to how the contention of the assessee that no expenditure was incurred is incorrect no disallowance should be made. We find from the assessment order that the assessee bank itself has offered a sum of ₹2,19,751/- under the provisions of Section 14A of the Act. From the perusal of the order of the Assessing Officer, it is clear that the Assessing Officer had not assigned any reason whatsoever as to how the claim of the assessee is incorrect. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. 6. Admittedly, in the present case also, against the voluntary disallowance made under section 14A of the Act by the assessee, the Assessing Officer has not recorded any satisfaction as to how the disallowance voluntarily made by the assessee is not correct and moreover, the Assessing Officer has not given any findings in the assessment order with regard to the correctness in respect of expenditure incurred to earn exempt income. The ld. DR could not controvert the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (supra), which was followed by the Coordinate Benches of the Tribunal in assessee s own case for the assessment year 2013-14 to decide the issue in favour of the assessee. Thus, respectfully following the decision of the Coordinate Benches of the Tribunal in assessee s own case for the assessment year 2013-14 as well as the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (supra), we hold that the Assessing Officer was not justified in making disallowance under section 14A of the Act. Thus, the ground raised by the assessee is allowed. Similar view has been taken by the bench in AY 2017-18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple has been reiterated by Hon ble High Court of Madras in the case of Marg Limited V/s CIT (TCA NO.41 to 43 220 of 2017 dated 30.09.2020). Further Hon ble Apex Court in Maxopp Investment Limited V/s CIT (91 Taxmann.com 154), at para-32, observed that it is that expenditure alone which has been incurred in relation to the income which is not includible in total income, is to be disallowed. If expenditure has no casual connection with the exempt income, such expenditure would be an allowable expenditure. 7. Applying the ratio of aforesaid principles as well as the consistent view of Tribunal in assessee s own case as cited before us, we would hold that since Ld. AO has mechanically applied the provisions of Rule 8D while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year, such disallowance is not sustainable in law. Accordingly, Ld. AO is directed to delete the additional disallowance while computing income under normal provisions as well as while computing Book profits u/s 115JB. We order so. 8. The appeal stand allowed in terms of our above order. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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