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Tax Publishers 2017 TaxPub(DT) 5424 (Del-Trib)

 

Asstt. CIT v. DLF Info City Developers (Kolkata) Ltd.

 

INCOME TAX ACT, 1961

--Disallowance under section 14A--Expenditure against exempt incomeNo satisfaction recorded by AO----Where AO had not pointed out any defect in the computation made by the assessee and had simply applied section 14A read with rule 8D for making disallowance, AO was not justified since for invoking the said section AO had to record satisfaction that disallowance made by assessee was not appropriate. --AO made disallowance of Rs. 43.67 lakhs by invoking the provisions contained under section 14A read with rule 8D qua exempt income earned by the assessee company during the year under assessment being dissatisfied with the assertion made by the assessee company that no expenditure had been incurred to earn exempt income. AO also rejected the contention of the assessee that none of the investments in the mutual fund had been made out of borrowed interest bearing funds. CIT(A) had restricted the addition made by AO to Rs. 68,433. Assessee submitted that all the investments in mutual funds which had earned exempt income were old investment and in the earlier years, no disallowance was made. Held: AO had not pointed out any defect in the computation made by the assessee and as such, provisions contained under section 14A read with rule 8D were not attracted. Sub-sections (2) & (3) of section 14A read with rule 8D of the rules had only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income, which can only be invoked if AO was not satisfied with the claim of the assessee. Further, CIT(A) erred in sustaining the disallowance of Rs. 68,433 by restricting the same to 10% of the exempt income even despite agreeing with the assessee that no satisfaction had been recorded by AO, rather proceeded to sustain the addition on the basis of surmises and guesswork which was not sustainable.

Income Tax Act, 1961 Section 14A

REFERRED : H.T. Media Ltd. v. Pr. CIT (2017) 399 ITR 576 (Del), CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) (Bom-HC) and CIT v. Abhishek Industries Limited. (2006) 286 ITR 1 (P&H-HC).

FAVOUR : In assessee's favour.

A.Y. : 2011-12



IN THE ITAT, DELHI BENCH

KULDIP SINGH, J.M. & PRASHANT MAHARISHI, A.M.

ACIT v. DLF Info City Developers (Kolkata) Ltd

ITA No. 969/Del/2016 & CO No. 167/Del/2016

7 December, 2017 A.Y. 2011-12

Assessee Allowed

Citations:--

GODREJ & BOYCE MANUFACTURING COMPANY LIMITED v. DY. COMMISSIONER OF INCOME-TAX & ANR. (2017) 394 ITR 449 (SC)

H.T. Media Ltd. v. Pr. CIT Of Income Tax-Iv, New Delhi (2017) 399 ITR 576 (Del)

Commissioner-2, Mumbai v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) (Bom-HC)

CIT v. Abhishek Industries Limited. (2006) 286 ITR 1 (P&H-HC)

Assessee by: R.S. Singhvi, CA and Satyajeet Goel, CA

Revenue by: Ashima Neb, Senior Departmental Representative

ORDER

Kuldip Singh, J.M.

The aforesaid appeal filed by the Revenue and cross objections filed by the assessee challenging the impugned order are being disposed off by way of consolidated order to avoid repetition of discussion.

2. The Appellant, Assistant Commissioner, Circle 1 (1), Gurgaon (hereinafter referred to as the Revenue) by filing the present appeal sought to set aside the impugned order dated 16-12-2015 passed by the Commissioner (Appeals)-I, Gurgaon qua the assessment year 2011-12 on the grounds inter alia that :--

1. Learned Commissioner (Appeals) has erred in fact and in law by not appreciating the application of rule 8D of the Income Tax Rules, 1961, so made by the assessing officer while making the disallowance under section 14A of the Income Tax Act, 1961.

2. Learned Commissioner (Appeals) has erred in fact and in law by restricting the disallowance under section 14A of Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962 from Rs. 43,67,640 to Rs. 68,433.

3. Learned Commissioner (Appeals) has erred in fact and in law by restricting the disallowance under section 14A of the Income Tax Act, 1961 read with rule 80 of the Inc

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