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AO 'ld give reason if he rejects plea of no dividend expense
AO 'ld give reason if he rejects plea of no dividend expense
Honourable Supreme Court of India (SC) reversed the order of the High Court (HC). SC held that assessing officer should mention reasons before rejecting assessee's claim. Assessee claimed that it didn't incur (spend) any expense to earn dividend income. But AO disallowed some expense using section 14A. 14A describes manner to calculate expense in cases where assessee's income includes exempt income. Earlier HC, ITAT had rejected its appeal.
This could be one of intriguing holdings done by the honorable Supreme Court of India (SC).
Everyone, whether it was Honorable High Courts (HC) or ITAT, was ruling in favour of department and holding outrightly for the use of section 14A.
And department, especially, when it came to the matter of dividend, gave no second thought, and just reduced the expenses, by following the section 14A ( is this not unruly- for the assessee).
But hold on,
In the case of Godrej and Boyce Manufacturing Company Limited
The highest judicial body of India, Honorable Supreme Court has given its final dictate:
1 - The tax officer needs to satisfy himself that the expense claim that assessee is making is not right,
2 - Mention why he is not accepting the expense claim made by the assessee and
3 - then he can invoke section 14A.
Ofcourse, many other pleadings were made by the appellant and the department; But I have mentioned the crux above.
Shoot me with questions, if you wish to hear more on this matter.
BTW, in this case department could not defend as it had allowed the assessee to claim all the expenses in the earlier years; And in this year all of a sudden, though there was no change in circumstances, it all of a sudden disallowed the expense.
The only change was amendment in Act, where section 14A was re-introduced.
