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| The Tax Publishers2019 TaxPub(DT) 1230 (Bom-HC) INCOME TAX ACT, 1961
Section 14A
Where once the assessee has made suo motu disallowance of expenditure incurred to earn exempt income, then it is incumbent upon AO to examine the correctness of such claim and record his dissatisfaction with the claim made, before proceeding to work out the disallowance under rule 8D of the Rules.
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Disallowance under section 14A - Expenditure against exempt income - Validity of -
Assessee was engaged in the business of trading in various items, investment and financing. It received exempt dividend income and made suo motu disallowance towards expenditure incurred to earn the exempt income. AO rejected the suo motu disallowance on the allegation that it was not in terms of rule 8D of the Income Tax Rules (Rules). Held: In terms of clear mandate of section 14(2), AO has to determine the amount of expenditure to be disallowed to earn exempt income as provided in rule 8D of the Rules, as if he is not satisfied with suo motu disallowance made by assessee. Therefore, in absence of recording of reason for not being satisfied with the suo motu disallowance offered by assessee, no disallowance under section 14A can be made.
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
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