TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 585
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....of Rule 8D(2)(ii) to compute the disallowance under section 14A is void ab initio as the Assessing Officer has failed lo record any dissatisfaction with regard to the claim made by the appellant that no expenditure has been incurred in relation to exempt income which is a condition precedent to invoke the provisions of Rule 8D of the Rules as per the provisions of section 14A(2) and 14A(3) of the Act. 2. (a) Without prejudice to what is stated in Ground No. 1 above, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in rejecting the scientific working of disallowance under section 14A of the Act submitted by the appellant during the course of assessment proceedings on the ground that the said working is cryptic and not self-explanatory and no proper explanation is given from appellant's side. 3. Without prejudice to what is stated in Ground No. 1 and 2 above, the learned Commissioner of Income-tax (Appeals) erred in rejecting the claim of the appellant that the stock-in-trade should not be considered for making disallowance under Rule 8D of the Rules. 4. Without prejudice to what is stated in Ground No, 1, 2 and 3 above....
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....erred tax free dividend income of Rs. 2,11,64,953/- and the sum has been claimed as exempt income. The assessee company has suo-moto disallowed Rs. 2,58,264/- under section 14A of the Income Tax Act. But Ld. AO was not agree with the contention of the assessee and applied Sec. 14A r.w.r. 8D and made gross disallowance of Rs. 26,05,735/-. 4. Thereafter, the assessee preferred first statutory appeal before the Ld. CIT(A) who revisited the various submission made on behalf of the assessee but, however, found no merit therein and held that Ld. AO was justified in making notice disallowance of Rs. 23,47,471/-. 5. We have gone through the relevant record and impugned order and heard both the parties it is clear that books of accounts were produced before the Ld. AO and he could not point out any nexus with the exempt income and that of the expenditure relatable to the exempt income. In several judicial proceedings Hon'ble Courts have held that there has to be some basis for making disallowance in support of its contention Ld. AR cited an order of Co-ordinate Bench wherein in similar facts and circumstances of the case relief was granted by the Co-ordinate Bench in assessee's own case f....
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....in AY 2008-09, a sum of Rs. 21,36,632/- in AY 2009-10, a sum of Rs. 69,53,073/- (including disallowance under Rule 8D(2)(ii) of interest amounting to Rs. 2,37,604/- for AY 2010-11 and a sum of Rs. 1,01,58,963/- for AY 2011-12. The CIT(A) also confirmed the disallowance made by AO for all the AYs. 11. Before us, the learned Counsel for the assessee stated that in any of the years, AO has not recorded any satisfaction as can be seen from the assessment order. The learned Counsel took us through the assessment order whereby the AO has relied on the decision of ITAT special Bench, Mumbai, in the case of ITO Vs. Daga Capital Management P. Ltd. 117 ITD 169 (SB) wherein it is held that Rule 8D is retrospective. The relevant Para 6.6 and 6.7 of the AO's order reads as under: - "6.6 The insertion of section 14A with retrospective effect, from 1.4.1962, is a serious attempt on the part of the Legislature not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total Income under the Act, against the taxable income. The Legislature has further clarified its intention that the expenses incurred can be allowed only ....
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....d the provisions of Rule 8D of the Rules as prospective and will apply for and from AY 2008-09 and thereafter the relevant assessment years falls wherein Rule 8D of the Rules will apply. The learned Counsel for the assessee drew our attention to Supreme Court decision in the case of Godrej & Boyce Mfg. Co. Ltd. (supra) and he referred to the relevant page 471, Para 37 & 38, wherein Hon'ble Supreme Court has clearly stated that it is mandatory for the AO with regard to subjective satisfaction on the issue. The relevant observations of the Hon'ble Supreme Court read as under: - "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law post....