TaxTMI 
TaxTMI 
2012 (12) TMI 568
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.... of reducing the same." 2. At the time of hearing, ld A.R. submitted that Ground No.2 taken by assessee is not pressed for. Hence, Ground No.2 is rejected. 3. In respect of Ground No.1, relevant facts are that assessee is a company engaged in manufacturing of pharmaceutical products. It has bulk drug manufacturing plant at Kurkumbh and a formulation manufacturing plat at Goa. The formulation plant at Goa is eligible for deduction u/s. 80IB. 4. During the course of assessment proceedings, the AO noticed that assessee had made an investment of Rs.36,17,94,985. The AO asked the assessee to explain as to why expenses relating to investment be not disallowed u/s.14A r.w Rule 8D. The AO has stated that assessee has earned tax free divid....
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.... dividend income of Rs.6,04,377 and, therefore, Rule 8D is not applicable. He further submitted that no interest bearing borrowed funds was used by the assessee to earn tax free income. ld A.R. referred to page 35 of PB and submitted that unsecured loan is of Rs.52,08,41,138 and the total interest and finance charges debited by the assessee is of Rs.3,24,00,000. He submitted that in the preceding assessment year, interest and finance expenditure was Rs.3,39,78,081 which has come down in the assessment year under consideration. He submitted that the entire interest was paid by the assessee on the debentures issued by the assessee. He submitted that the debenture amount was used by the assessee for its business purposes. He referred page 21 o....
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....le 8D of Income tax Rules, the AO as per section 14A(2) of the Act, has to record his satisfaction that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form part of the assessee's total income under the Act and, thereafter, the AO is to determine the amount incurred in relation to such income, in accordance with such method as may be prescribed i.e., under rule 8D of I.T. Rules. He submitted that if no such satisfaction is recorded by the AO, regarding correctness of the claim of the assessee, Rule 8D cannot be applied to make the disallowance. He submitted that the Tribunal also considered the decisi....
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....ule 8D is applicable from assessment year 2008-09 and, therefore, the AO is justified to make the disallowance as per Rule 8D of Income tax Rules r.w. sec 14A. 8. We have considered the submissions of ld representatives of parties and orders of authorities below. We have also gone through the cases cited before us. On perusal of page 36 of PB, which is a copy of profit and loss account for the financial year relevant to assessment year under consideration, assessee has debited under the head "interest and finance charges" a sum of Rs.3,24,00,000. On perusal of Schedule-Q at page 42 of PB r.w. 21 of PB, we agree with ld A.R. that assessee has paid in the assessment year under consideration, the interest on debentures of Rs.3,24,00,00....