INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure incurred against exempted income - Suo motu disallowance made by assessee -

Assessee had earned exempt income. On enquiry by AO for disallowance under section 14A, the assessee submitted that he incurred advisory service charges and securities transaction fax and other charges towards earning exempt income. However, the said expenses were debited to capital account of the assessee and he did not claim it in his Income & Expenditure account out of the total expenses an amount was depreciation allowance. It was further submitted that disallowance under section 14A of the Act can be only made if there was a direct nexus between expenditure incurred and exempt income. Held: ITAT in assessee's own case for earlier years had restricted the disallowance to the suo moto disallowance made by assessee. No reason, whatsoever, was attributed by AO as to why the suo moto disallowance by assessee was not appropriate. Without assigning any reason, suo moto disallowance proposed by assessee on the facts of this case could not be rejected. Hence, AO was directed that suo moto disallowance proposed by assessee should be accepted and accordingly, disallowance under section 14A should be restricted.

Followed:Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) : 2018 TaxPub(DT) 1403 (SC) Dr. Ashwin Balchand Mehta v. Jt. CIT [ITA Nos. 5329 & 6293/M/2012, dt. 6-11-2015] Shri Vishnu Anant Mahajan v. Asstt. CIT (ITA No. 3002/Ahd/2009) dated 25-4-2012 : 2012 TaxPub(DT) 2246 (Ahd-Trib), and Hoshang D Nanavati v. Asstt. CIT (ITA No. 3567/Mum/2007) dated 18-3-2011 : 2012 TaxPub(DT) 2537 (Mum-Trib).

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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