Condis India Helathcare Pvt. Ltd. Vs ACIT (ITAT Cochin)
ITAT Cochin held that disallowance under section 14A read with rule 8D of the Income Tax Rules in a mechanical manner without recording proper satisfaction is unsustainable in law. Accordingly, addition set aside.
Facts- AO during the course of assessment proceedings found that the assessee has shown dividend income of Rs. 2,88,51,340/- claiming the same as exempted from tax u/s 10(34) of the Act. However, the assessee has not made any disallowance under the provisions of section 14A r.w. rule 8D corresponding to such exempted income. Thus, the AO invoked the provisions of s. 14 r.w. rule 8D and made disallowance of Rs. 60,65,112/- towards administrative expenses being 1/2% of the average value of investment and added the same to the total income of the assessee.
CIT(A) confirmed the order of the AO. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC) has held that proper satisfaction ought to have been recorded by the AO while making the disallowance u/s 14A of the Act.
Held that the disallowance u/s 14A r.w. rule 8D of Income Tax Rule has been made by the AO in a mechanical manner and without recording proper satisfaction as envisaged u/s 14Ar.w. rule 8D of the I.T. Rules. Accordingly, we set aside the findings of the learned CIT(A) and direct the AO to delete the addition made by him.
