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| The Tax Publishers2021 TaxPub(DT) 0959 (Mum-Trib) INCOME TAX ACT, 1961
Section 14A(2)
Where AO had not recorded any objective satisfaction as to why computation mechanism provided in rule 8D(2) would come into operation, having regard to the accounts of assessee. Accordingly, invocation of rule 8D was not in terms of mandate laid down under section 14A(2) and, therefore, disallowance was deleted.
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Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Non-recording of dissatisfaction by AO as to correctness of assessee's claim
Assessee earned tax-free dividend income and claimed suo moto disallowance under section 14A. AO invoked rule 8D and worked out additional disallowance. Assessee challenged this on the ground of non-recording of satisfaction by AO. Held: It was crystal clear that AO had not recorded any objective satisfaction as to why computation mechanism provided in rule 8D(2) would come into operation, having regard to the accounts of assessee. Accordingly, invocation of rule 8D was not in terms of mandate laid down under section 14A(2) and, therefore, disallowance was deleted.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
INCOME TAX ACT, 1961
Section 37(1), Expln.
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