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| The Tax Publishers2020 TaxPub(DT) 3986 (Mad-HC) INCOME TAX ACT, 1961
Section 14A
Where AO must, in the first instance, determine whether claim of assessee in that regard was correct and the determination must be made having regard to the accounts of assessee and satisfaction of AO must be arrived at on an objective basis, It is only when AO is not satisfied with the claim of assessee, that legislature directs him to follow the method that may be prescribed, since no satisfaction was recorded by AO, therefore, disallowance was deleted by Tribunal.
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Disallowance under section 14A - Expenditure incurred on exempted income - Recording of satisfaction -
Issue arose for consideration as to whether Tribunal was right in not considering the fact that the assessee had incurred interest expenditure and made investment more than its reserves and surpluses and accordingly wrongly deleted the disallowance under section 14A. Held: High Court in the case of Godrej & Boyce Manufacturing Company Limited, Mumbai v. DCIT [(2010) 328 ITR 0081 (Bom) : 2010 TaxPub(DT) 2182 (Bom-HC)] 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 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 assessee claims that no expenditure was incurred by him in relation to income which does not form part of total income. The above said legal position was rightly followed by the tribunal while deciding the assessee's case and therefore, rightly dismissed the appeal filed by revenue.
Followed:CIT v. Tidel Park Ltd. 2020 TaxPub(DT) 2875 (Mad-HC) Godrej And Boyce Mfg. Co. Ltd. v. DCIT & Anr. (2010) 328 ITR 0081 (Bom) : 2010 TaxPub(DT) 2182 (Bom-HC) ACIT v. Tamil Nadu State Transport Corporation (Salem) Ltd. [ITA Nos. 813 & 814/Chny/2018, dt. 5-7-2019]
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
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