The Tax Publishers2020 TaxPub(DT) 4041 (Mad-HC) : (2020) 275 TAXMAN 0502

INCOME TAX ACT, 1961

Section 14A Section 8D

Disallowance under section 14A can never exceed exempted income earned by assessee during the particular assessment year and further, without recording satisfaction by AO that apportionment of disallowable expenditure made by assessee with respect to exempted income was not acceptable for reasons to be assigned AO, he could not resort to the computation method under rule 8D.

Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Non-recording of satisfaction by AO--Disallowance in excess of tax free income

Assessee earned tax free dividend income on investments in shares but claimed no disallowance under section 14A. AO invoked rule 8D and made disallowance in excess of tax free income earned by assessee. Assessee challenged this on the ground of non-recording of satisfaction by AO in terms of section 14A(2). Held: Disallowance under section 14A can never exceed exempted income earned by assessee during the particular assessment year and further, without recording satisfaction by AO that apportionment of disallowable expenditure made by assessee with respect to exempted income was not acceptable for reasons to be assigned AO, he could not resort to the computation method under rule 8D.

Followed:CIT v. Tidel Park Limited [TCA Nos. 732 & 733 of 2018, decided on 7-7-2020] : 2020 TaxPub(DT) 2875 (Mad-HC), Joint Investments Private Ltd. v. CIT (2015) 372 ITR 694 (Del.) : 2015 TaxPub(DT) 1375 (Del-HC), CIT v. Taikisha Engineering India Limited [ITA No. 115 of 2014, decided on 25-11-2014] : 2015 TaxPub(DT) 391 (Del-HC) and Godrej & Boyce Manufacturing Company Limited v. Dy. CIT (2010) 328 ITR 81 (Bom) : 2010 TaxPub(DT) 2182 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :



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