INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Necessity of recovery of dissatisfaction by AO -

Revenue filed appeal against the order of Tribunal deleting the addition made under section 14A by holding that disallowances made under section 14A cannot exceed the exempt income, when the provisions of the said section as well as rule 8D does not provide for any such exceptions. Held: Substantial questions of law raised by the revenue had been decided against the revenue in case of M/s. Tidel Park Ltd. [T.C.A. Nos. 732 and 733 of 2018, dt. 7-7-2020] : 2020 TaxPub(DT) 2875 (Mad-HC) wherein it was held that AO must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of AO must be arrived at on an objective basis. It is only when the AO is not satisfied with the claim of the assessee, that the legislature directs him to follow the method that may be prescribed. Sub-section (3) of section 14A provides for the application of sub-section (2) also to a situation where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. Thus, following the same the issue was decided in favour of assessee.

Followed:M/s.Tidel Park Ltd. [T.C.A. Nos. 732 and 733 of 2018, dt. 7-7-2020] : 2020 TaxPub(DT) 2875 (Mad-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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