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| The Tax Publishers2021 TaxPub(DT) 4741 (Del-Trib) INCOME TAX ACT, 1961
Section 14A(2)
When audited financials of assessee company had otherwise been accepted by AO, generic dissatisfaction as to correctness of claim of assessee without assigning any reason was not a valid satisfaction which was mandatory under section 14A(2). Therefore, mechanical application of rule 8D to reject suo motu disallowance under section 14A by assessee was not sustainable in the eyes of law.
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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 that AO had mechanically invoked rule 8D without recording his satisfaction that suo moto disallowance made by assesse was not correct. Held: When audited financials of assessee company had otherwise been accepted by AO, generic dissatisfaction as to correctness of claim of assessee without assigning any reason was not a valid satisfaction which was mandatory under section 14A(2). Therefore, mechanical application of rule 8D to reject suo moto disallowance under section 14A by assessee was not sustainable in the eyes of law.
Relied :Maxopp Investments Ltd. v. CIT (2018) 402 ITR 640 (SC) : 2018 TaxPub(DT) 1403 (SC)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 199 Rule 37BA(3)(ii)
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