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of <h1>Tribunal Upheld Disallowance under Income-tax Act; Rule 8D Applies</h1> <h3>Lakshmi Ring Travellers, Coimbatore Versus Assistant Commissioner of Income-tax, Company Circle-I (1), Coimbatore</h3> Lakshmi Ring Travellers, Coimbatore Versus Assistant Commissioner of Income-tax, Company Circle-I (1), Coimbatore - TMI Issues: Disallowance under Section 14A of the Income-tax Act, 1961Analysis:The appeal pertains to the assessment year 2008-09 and challenges the order of the Commissioner of Income-tax (Appeals) confirming the disallowance under Section 14A of the Income-tax Act, 1961. The grounds raised by the assessee primarily question the correctness of the disallowance and the legal tenability of the Commissioner's reasoning. The learned Chartered Accountant representing the assessee argued that the Assessing Officer must conduct necessary factual inquiries before invoking Section 14A and making any disallowance. It was contended that the Assessing Officer's reliance on Rule 8D for the disallowance without factual inquiry was against the law, rendering the addition invalid. On the other hand, the learned Commissioner highlighted the scheme of Section 14A, emphasizing the special provision for treating expenditure related to income not included in the total income. Section 14A(3) mandates the Assessing Officer to follow Rule 8D even if the assessee claims no expenditure is incurred in relation to such income.The Tribunal analyzed the arguments in detail, citing Section 14A(1) and (2) which prohibit the deduction of expenditure related to income not forming part of the total income and provide a mechanism for determining such expenditure. It was noted that if the Assessing Officer is unsatisfied with the assessee's computations, he must compute the quantum as per the prescribed method, which includes Rule 8D. Section 14A(3) further mandates the Assessing Officer to presume incurring of expenditure even if the assessee claims otherwise, thereby requiring the disallowance of presumptive expenditure as per the rules. The Tribunal interpreted this provision as a statutory presumption replacing the need for factual evidence, obligating the Assessing Officer to apply Rule 8D even when no expenditure is claimed to have been incurred. Consequently, the Tribunal dismissed the appeal, upholding the disallowance under Section 14A.In conclusion, the Tribunal's decision underscores the statutory presumption under Section 14A, necessitating the disallowance of expenditure even in cases where no actual expenditure is claimed, and mandates the application of Rule 8D by the Assessing Officer based on statutory provisions.
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