Case Law Details
Indica Industries Pvt. Ltd. Vs ITO (ITAT Delhi)
The issue under consideration is whether the disallowance made by AO u/s 14A is justified in law?
ITAT states that, it is found as an admitted position that the assessee’s investments were handled by portfolio managers to whom only a particular sum was paid as fees, which along with other direct expenses, being the amount voluntarily disallowed by the assessee. Sub-section (2) of section 14A clearly stipulates that the Assessing Officer shall determine the amount of expenditure incurred in relation to exempt income as per Rule 8D if he, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim made by the assessee. The crucial question which looms large before us is whether the Assessing Officer recorded proper satisfaction before venturing to make disallowance as per Rule 8D. It can be seen from the assessment order itself that the Assessing Officer has nowhere recorded any satisfaction about the incorrect claim having been lodged by the assessee with reference to its accounts. There is no discussion whatsoever about the examination of the assessee’s claim about the actual incurring of expenses in relation to the exempt income. It can be seen from the impugned order that the Assessing Officer even did not consider the correct amount offered by the assessee for disallowance. In view of the fact that no proper satisfaction was recorded, in our considered opinion, the Assessing Officer did not acquire any valid jurisdiction for computing disallowance u/s 14A. Since the ld. CIT(A) has sustained the amount disallowable u/s 14A, being the amount voluntarily offered by the assessee, ITAT uphold the impugned order to pro tanto and respectfully ITAT direct the Assessing Officer to delete the disallowance.
FULL TEXT OF THE ITAT JUDGEMENT
The above cross appeals by the assessee and the revenue are preferred against the order of the CIT(A)-4, New Delhi dated 01.05.2017 pertaining to A.Y 2013-14. Both these appeals were heard together and are disposed of by the by this common order for the sake of brevity and convenience.
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