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02/05/2020 - Voice of CA presents - Useful Updates
Saturday, May 2, 2020

  I. Headlines Today:   

  1. Govt. extends lockdown period for two week starting from May 4, 2020; Issues zone wise list of prohibited activities  (Click for detail)
  2. MCA issues guidelines for funding for research studies on Corporate Governance  (Click for detail)
  3. MCA comes up with draft procedure for Submission of Audit Files to NFRA  (Click for detail)
  4. MCA extends due date of filing of E-form NFRA-2  (Click for detail)
  5. Government looking to raise Rs 10,000 crore via tax-free bonds: Report  (Click for detail)
  6. Govt defers release of April GST collection data amid Covid-19 lockdown  (Click for detail)
  7. IFRS 3: IASB suggested changes in accounting for Goodwill and Impairment on account of Business Combinations  (Click for detail)
  8. IRDAI extends timelines for review and updation of existing  (Click for detail)
  9. Auditing and Assurance Standards Board – Online Panel of Experts for Addressing Bank Branch Audit Related Queries for Financial Year 2019-20  (Click for detail)

II. Direct Taxes Case Law: 

1.  ACIT Vs. Indiabulls Real Estate Ltd., Appeal No. 6602/Del/2016, Date of Judgement: 11.03.2020, ITAT – Delhi

Whether AO can reject suo-moto disallowance made by assessee u/s 14A of the Income Tax Act,1961 without recording his satisfaction required u/s 14A(2) of the Act?

Held: No

The assessee company earned exempt income during the assessment year.  The assessee company filed its ROI and suo-moto made disallowance of expenditure incurred in earning the exempt income u/s 14A of the Act. During the assessment year, Ld. AO without recording his satisfaction reject the claim of assessee and made disallowance  u/s 14A of the Act which was much more than exempt income earned by assessee company on the ground that no rationale was furnished by the assessee in deciding the amount disallowed. Further, no separate staff or work station has been maintained by the assessee towards investment activities. The AO further held that the earning of income is not in the nature of passive activity but in fact, it is a well coordinated management decision regarding the deployment of funds.

Hon’ble ITAT held that “While re-computing the disallowance, the Assessing Officer has not followed the provisions of Section 14A(2) of the Income Tax Act, 1961 wherein it is mandated that, if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to which does not form part of the total income under the Act, then the Assessing Officer shall determine the amount of expenditure incurred in relation to such income. From the reading of the judgment of the Hon’ble Apex Court in the case of Maxopp Investment Ltd. Vs CIT in CA Nos. 104-109 OF 2015, we find that having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the account of the assessee suo moto disallowance under Section 14A was not correct. In the instant case, we find that no such satisfaction has been recorded by the A.O to come to the conclusion to invoke the provisions of Section 14A(2). Hence, we decline to interfere with the order of the ld. CIT (A) and the disallowance is directed to be deleted.

(Please click here for judgment)


Golden Rules:

  A great thinker was asked,
what is the meaning of life?
He replied, "life itself has no meaning,
life is an opportunity to create a meaning"


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