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Facts
The assessee earned exempt dividend income of ₹76,30,220/- and had substantial investments. The assessee suo moto offered ₹1,96,311/- for disallowance under Section 14A, but the Assessing Officer quantified a higher disallowance of ₹53,53,375/- under Section 14A read with Rule 8D, which was upheld by the Ld. CIT(A).
Held
The Tribunal held that the Assessing Officer failed to record satisfaction regarding the incorrectness of the assessee's own computation, which is a mandatory prerequisite for invoking Section 14A read with Rule 8D. Consequently, the higher disallowance made by the AO was deleted, while the suo moto disallowance offered by the assessee was retained.
Key Issues
Whether disallowance under Section 14A read with Rule 8D can be made without the Assessing Officer first recording satisfaction that the assessee's own computation of disallowable expenditure is incorrect.
Sections Cited
143(3), 14A, Rule 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.01.2025 for the AY 2016-17.
The only issue raised by the assessee is against the order of ld. CIT (A) upholding the assessment order framed u/s 143(3) dated 24.12.2018, wherein disallowance u/s 14A was made to the tune of ₹53,53,375/-.
The facts in brief are that during the course of assessment proceedings, the ld. AO observed that during the year the assessee has earned dividend income of ₹76,30,220/- and claimed the same as exempt. The ld. AO further noted that the assessee has invested in the quoted and unquoted shares to the tune of ₹107,47,12,502/- as on 31.03.2016. the ld. Counsel for the assessee further noted that the investment has potential to fetch the dividend income in future. It is
Now, after perusing the order of the ld. AO, we find that the ld. AO has not recorded any satisfaction as to how the calculation furnished by the assessee is wrong necessitating the calculation of disallowance u/s 14A read with Rule 8D of the Rules. Therefore, in absence of any satisfaction the provisions of section 14A can not be invoked and no disallowance can be made u/s 14A read with section 8D of the Rules. The case find support from the decision of the co-ordinate bench in case of TIL Ltd. Vs. DCIT in vide order dated 23.12.2022, in which the Tribunal has followed the Calcutta High Court decision in case of REI Agro Ltd. in GA No. 3581 of 2013 and Hon'ble Delhi HC in case of ACB India Ltd. Vs. ACIT (2015) 374 ITR 0108. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. However, as disallowance offered by the ld. assessee suo moto ₹1,96,311/- has to be made. Consequently, the appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 29.07.2025.