Sapphire Foods India Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that disallowance under section 14A of the Income Tax Act upheld since assessee failed to compute suo moto disallowance which is mandatory, even if no exempt income is earned. Thus, appeal of assessee dismissed.
Facts- The assessee is a private limited company. The case of the assessee was selected for scrutiny. AO observed that the assessee made substantial investments in shares amounting to ₹1,68,58,50,000/- in listed equities being, Gamma Pizzakraft (Overseas) Pvt. Ltd., a subsidiary company of the assessee. As per AO, as the investments made were capable of generating exempt income, AO added ₹16,38,260/- being 1% of ₹1,68,58,50,000 u/s. 14A Rule 8D.
CIT(A) upheld the disallowance. Being aggrieved, the present appeal is filed.
Conclusion- Held that it is clear that, there is only two limbs under sub clause 2 of Rule 8D to compute disallowance. Further from the show cause notices issued by the Ld.AO it is clear that the evidences and documents called upon by Ld.AO was having regards to the accounts filed by the assessee. Though there was interest expenditure claimed by the assessee in its profit and loss account, Ld.AO computed disallowance only under the second limb sub in clause 2 of Rule 8D. Thus, the argument advanced by the Ld.AR that, there is non application of mind and that, no satisfaction is recorded by the Ld.AO, deserves to be rejected. This argument deserves to be rejected on one more count, that, even after the amended provisions being applicable to the year under consideration, the assessee failed to compute suo moto disallowance which is mandatory, even if no exempt income is earned.
