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2 ITA 14/JP/2020_ Theme Engineering Service P Ltd. Vs ACIT

4. Rival contentions have been heard and record perused. Facts in brief are that the assessee concern is a private limited company and doing profession of consultancy & undertaking contracts of supervision of technical nature. The assessee filed his return of income on 29/11/2014 for A.Y. 2014-15 declaring total income of Rs. 3,69,40,920/-under the head income from business and profession and Income from other sources. The AO selected the case of assessee for scrutiny and issued a notice u/s 143(2) of the Act to the assessee on 31/08/2015 in response to the notice, the assessee submitted necessary reply.

3 ITA 14/JP/2020_ Theme Engineering Service P Ltd. Vs ACIT

7. We have considered the rival contentions and carefully gone through the orders of the authorities below. In so far as the disallowance U/s 14A of the Act is concerned, we found that as at 31.03.2013 the assessee had total investment in business assets at Rs. 22,54,47,989 against which he had only a sum of Rs. 1,08,95,957 as interest bearing funds (in the form of Long term borrowings) and rest of the funds of the assessee is interest free amounting to Rs. 21,45,52,032.

8. We found that as at 31.03.2014 the assessee had total investment in business assets at Rs. 27,54,53,568 against which he had only a sum of Rs. 2,03,04,662 as interest bearing funds (in the form of Long-term borrowings) and rest of the funds of the assessee is interest free amounting to Rs. 25,51,48,906.

9. In view of the above factual position, it is clear that the assessee has not incurred any interest expenditure towards investment in tax free securities. For invoking provisions of Section 14A(2) r.w.r. 8D of the Income Tax Rules, 1962, the A.O. is required to record a positive satisfaction to the effect that the claim of assessee towards for earning exempt income is not correct and he has to estimate such expenditure. Further Section 14A(3) states that provisions of sub-Section 2 shall also apply if the assessee 4 ITA 14/JP/2020_ Theme Engineering Service P Ltd. Vs ACIT claims that no expenditure has been incurred for earning exempt income. However, only after recording his satisfaction only the A.O. can proceed to apply the provisions of Rule 8D. The A.O. did not record his satisfaction about claim of the assessee for NIL expenditure for earning exempt income and hence invocation of Rule 8D is unjustified. Accordingly, we do not find any justification for the disallowance of Rs. 1,37,624/- made by the A.O. U/s 14A of the Act. Hence, we direct the A.O. to delete the same.

1. vihykFkhZ@The Appellant- Theme Engineering Services Pvt. Ltd., Jaipur.

2. izR;FkhZ@ The Respondent- The A.C.I.T., Circle-6, Jaipur.

6 ITA 14/JP/2020_ Theme Engineering Service P Ltd. Vs ACIT

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 14/JP/2020) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar