The Tax Publishers2021 TaxPub(DT) 0024 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 14A

In absence of any material, basis adopted by assessee in making disallowance under section 14A could not be upheld and invocation of rule 8D by AO was justified. However, investments made through the involvement of PMS providers were to be ignored while working out disallowance of expenses under rule 8D because such investment were made on the advice of PMS and for this purpose PMS was compensated by assessee by way of fees paid to them which had already been disallowed by assessee.

Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Assessee pleading non-recording of satisfaction by AO--Assessee nowhere made any rational submission for adopting the disallowance on estimation basis

Assessee earned tax free dividend income and claimed disallowance under section 14A on estimate basis. AO invoked rule 8D and worked out additional disallowance. Assessee challenged this on the ground of AO not having recorded dissatisfaction with correctness of assessee's claim. Held: AO clearly recorded in his order that he was not satisfied with the basis adopted by assessee for making disallowance under section 14A read with rule 8D as the same was based on the estimation, i.e., 0.5% of the dividend income. The primary onus lay upon assessee to justify the stand taken based on material facts or the provisions of law. Thus, in absence of any material, basis adopted by assessee in making disallowance under section 14A could not be upheld and invocation of rule 8D by AO was justified. However, investments made through the involvement of PMS providers were to be ignored while working out disallowance of expenses under rule 8D because such investment were made on the advice of PMS and for this purpose PMS was compensated by assessee by way of fees paid to them which had already been disallowed by assessee.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2009-10 to 2013-14



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