TaxTMI 
TaxTMI 
2014 (12) TMI 1010
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....the Income Tax Act. 2. Before adverting to the specific grounds in both these appeals, it is necessary to take into consideration the brief factual backgrund giving rise to two appeals in one assessment year. The brief facts are that the assessee has filed its return of income on 17.11.2006 declaring Nil income and book profit at Rs. 62,03,13,718/- u/s 115JB of the Act. An assessment order was passed u/s 143(3) on 29.12.2008. The Assessing Officer made a disallowance u/s 14A of the Act read with rule 8D of IT Rules, 1962 amounting to Rs. 4,26,75,114/- in the normal computation of the total income. The Assessing Officer did not add this amount in the book profit. The assessee has challenged disallowance of this amount in appeal before the....
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....ed 29.12.2008 passed by the ACIT, Central Circle 2(3) Bangalore u/s 143(3) of the I.T. Act, 1961 for the assessment year 2006-07 stands modified to the extent that the income u/s 115JB of the Income Tax Act, 1961 shall be recomputed by adding the sum of Rs. 4,26,75,114/- being the amount relatable to the funds invested on shares to the book profit computed by the Assessing Officer as per the assessment order u/s 143(3) of the Income Tax Act, 1961 and tax payable u/s 115JB of the Income Tax Act, 1961 shall accordingly be recomputed. The Assessing Officer is directed to compute the book profit and the tax payable u/s 115JB of the Income Tax Act, 1961 in accordance with the above directions and determine the tax payable by the assessee as per ....
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....h the record carefully. The Hon'ble Delhi High Court in the case of Maxopp Investments Ltd (Supra) has held that Rule 8D is applicable from assessment year 2008-09, that does not mean that prior to the introduction of this Rule, no amount can be considered as incurred for the purpose of earning tax free income. The disallowance has to be made, first examining the accounts of the assessee and if the Assessing Officer is satisfied that the accounts do not depict true picture, then he can work out the disallowance on the basis of a reasonable and acceptable method of apportionment. The learned CIT (A) ought to have not deleted the disallowance in Toto, rather ought to have examined whether any disallowance is possible or not. In other word....
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.... and such rejection must be for disclosed cogent reasons. It is then that the question of determination of such expenditure by the assessing officer would arise. The requirement of adopting a specific method of determining such expenditure has been introduced by virtue of sub-section (2) of section 14A. Prior to that, the assessing was free to adopt any reasonable and acceptable method. 42. Thus, the fact that we have held that sub-sections (2) & (3) of section 14A and Rule 8D would operate prospectively (and, not retrospectively) does not mean that the assessing officer is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected....
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....iture for the purposes of section14A (1). In case, the assessing officer is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment". 7. In view of the above discussion, we are of the view that the order of the learned CIT (A) is not sustainable. We set aside the order dated 7.10.2013 and restore thi....