TaxTMI 
TaxTMI 
2017 (8) TMI 717
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....nd circumstances are similar in all the assessment years, the appeal for the Assessment Year 2008-09 in ITA No. 7014/Mum/2013 is taken up as the lead case. This appeal by the assessee is directed against the order of CIT(A)-36, Mumbai dated 16.9.2013, pertaining to the Assessment Year 2008-09, which in turn has arisen from the order passed by the Assessing Officer dated 29.12.2011 under section 143(3) r.w.s 153A of the Income Tax Act, 1961 (in short 'the Act'). 3. The solitary grievance of the assessee is with regard to the disallowance computed by the income-tax authorities u/s 14A of the Act. In brief, the relevant facts are that in response to a notice issued u/s 153A of the Act assessee filed its return of income for the Assessment Yea....
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....ct that the disallowance computed by the assessee was incorrect. It has been canvassed that only after recording such a satisfaction, in an objective manner, about the incorrectness of assessee's claim, that the Assessing Officer could have invoked Rule 8D of the Rules in order to compute the disallowance. Secondly, it is sought to be pointed out that the Assessing Officer was required to demonstrate the nexus between the expenses sought to be disallowed and the exempt income, which has not been done, and rather the disallowance has been mechanically computed at Rs. 9,95,080/- by applying Rule 8D of the Rules. At the time of hearing, the learned representative has also referred to the written communications addressed to the Assessing Office....
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...., assessee earned dividend income of Rs. 1,15,57,760/- and in the return of income, it made a suo motu disallowance of Rs. 57,790/- as being expenditure covered by the disallowance envisaged u/s 14A of the Act. Notably, the Assessing Officer has differed with the assessee on the amount of such expenditure, which according to him, is to be determined by application of the formula contained in Rule 8D of the Rules at Rs. 9,95,080/-. Essentially, the dispute between the assessee and the Revenue pertains to the quantification of disallowance envisaged u/s 14A of the Act and insofar as the applicability of Sec. 14A of the Act is concerned, there is no dispute. 8. In the above background, now we may proceed to adjudicate the controversy in the p....
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....of certain amount of expenditure in relation to income which does not form part of the total income. So, however, the requirement of recording the satisfaction contemplated under Sub-section (2) of Sec. 14A of the Act is applicable in the context of Sub-section (3) also. The aforesaid legal position is aptly supported by the judgment of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra) as well as the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd., 347 ITR 272 (Delhi). We are saying so in the present case for the reason that the initial plea raised by the assessee before the Assessing Officer was that it has incurred no expenditure in relation to the exempt income. At the time of hearin....
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....ssee and proceeding to determine the disallowance by applying the formula contained in Rule 8D of the Rules. In fact, the phraseology of Sec. 14A of the Act itself specifies that the satisfaction contemplated is required to be arrived at "having regard to the accounts", an approach which is conspicuous by its absence in the present case. Therefore, in view of such an inadequacy in the action of the Assessing Officer, it has to be held that the satisfaction contemplated u/s 14A(2) of the Act has not been recorded by the Assessing Officer and thus, he has failed to comply with the condition precedent before embarking on applying the formula contained in Rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act. Thus, in our....