HDFC Bank Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that in absence of recording of non-satisfaction in terms of section 14A(2) of the Income Tax Act, invocation of Rule 8D is not permissible. Accordingly, disallowance u/s. 14A read with Rule 8D cannot be sustained.
Facts- The assessee claimed an exempt income of Rs. 612,36,54,955/-while it had made disallowance under Section 14A of the Act as per its Accountant’s report amounting to Rs. 70,18,504/-. The assessee contended that when the securities were held as stock-in-trade, no disallowance u/s 14A r.w.r. 8D is warranted. However, AO was satisfied that the disallowance u/s. 14A as per Rule 8D had to be made. Accordingly, as per calculation made for the purpose of disallowance u/s. 14A of the Act, disallowance was worked out to Rs. 80,14,11,690/-. Thus, a sum of Rs. 79,43,93,186/- (i.e. Rs. 80,14,11,690 – Rs 70,18,504) was disallowed and added to the total income of the assessee. The AO applied Rule 8D(2)(ii). CIT(A) granted partial relief.
Conclusion- Held that from the plain reading of the assessment order, the satisfaction/dissatisfaction of the AO is not discernible at all. He has failed to point out any infirmity in the suo motu disallowance made by the assessee itself. It is noticed that the issue of recording of satisfaction is a recurrent one involving identical facts in various assessment years in the case of the assessee’s own case and the ITAT has allowed its claim in appeals for AYs 2016-17/2017-18 and 2018-19. Therefore, in absence of any such satisfaction no disallowance under section 14A of the Act can be made. In the present case before us, AO has not taken into consideration the elaborate details and scientific basis adopted while arriving at the suo moto disallowance but has proceeded merely on his own presumptions to invoke section 14A r.w.r. 8D. Thus, Rule 8D cannot be invoked where the suo moto disallowance made by the assessee is not found to be satisfactory by the AO having regard to the accounts of the assessee. In the absence of recording the aforesaid fact of non- satisfaction in terms of section 14A(2) of the Act, invocation of Rule 8D is not permissible. Since, in the present case, no proper satisfaction has been recorded by the AO in terms of the provisions of section 14A(2) of the Act, having regard to the accounts of the assessee about the correctness of the claim of the assessee in respect of expenditure incurred in relation to exempt income, respectfully following the aforesaid decisions, we do not find any reason for upholding the disallowance made by the AO under section 14A read with Rule 8D of the Rules. Accordingly, the same is directed to be deleted. The ground of appeal is therefore allowed.
