TaxTMI 
TaxTMI 
2022 (6) TMI 931
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....26.03.2013 for assessment year(s) 2010-11 & 2012-13. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off together by way of a consolidated order. We shall first take up the assessee's appeal for assessment year 2010-11, wherein the impugned order has been assailed before us on the following grounds : "1. The learned CIT erred in upholding the action of the AO making disallowance u/s.14A read with rule 8D(2)(iii) of Rs.11,59,010/- ( Ref. Para 3.2 of Assessment order). 2. The learned CIT erred in holding that appellant's submissions that no indirect expenditure attributable to investments was charged to profit and loss A/c was not based upon "tangible evidence" mere....
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....ficer worked out the disallowance u/s. 14A of the Act by triggering the mechanism contemplated under rule 8D(2)(iii) of the Income Tax Rules, 1963 at Rs.11,59,010/-. 3. Aggrieved, the assessee assailed the assessment order before the CIT(Appeals). During the course of the appellate proceedings, the assessee, inter alia, assailed the validity of the disallowance that was worked out by the Assessing Officer u/s.14A r.w Rule 8D(2)(iii) on the ground that the Assessing Officer had failed to record his satisfaction as to why the assessee's claim that no part of the administrative expenditure was attributable to earning of the exempt income was not to be accepted. Also, it was the claim of the assessee that the Assessing Officer had failed to ....
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.... not attributed and therein disallowed any part of expenditure on a suo-motto basis in its return of income. On perusal of the records, we find that it is the claim of the assessee that as no part of the expenditure was attributable towards earning of the exempt dividend income, therefore, no disallowance was offered u/s.14A of the Act. On the contrary, the Assessing Officer being of the view that a part of the administrative expenditure incurred by the assessee and, claimed by it as deduction was attributable to making of investments in the exempt income yielding shares and receipt of dividend income arising therefrom, thus, triggered the mechanism contemplated under Rule 8D(2)(iii) and worked out a disallowance of Rs. 11,59,010/- u/s.14A ....
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....be accepted. On appeal, the CIT(Appeals) being of the view that the Assessing Officer had after duly recording his satisfaction worked out the disallowance u/s.14A of the Act, thus, rejected the aforesaid claim of the assessee. Also, the claim of the assessee that the Assessing Officer had failed to establish nexus between the exempt dividend income and the expenditure incurred did not find favour with the CIT(Appeals), as he was of the view that as the assessee had failed to maintain separate account as mandated in section 14A(2)/(3) of the Act, therefore, no burden was cast upon the Assessing Officer to establish the aforesaid nexus. 7. After having given thoughtful consideration to the aforesaid issue in hand, we are unable to persuad....
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....he 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 postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." Also a similar vie....
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....serve, that the Hon'ble High Court of Bombay in the case of CIT v. Sociedade De Fomento Industrial Pvt. Ltd. (No. 2) (2020) 429 ITR 358, referring to the facts involved in the case before it, had observed, that though the Assessing Officer had discussed the provisions of section 14A(1) of the Act, but had not justified how the expenditure which the assessee had incurred during the relevant year related to the income not forming part of its total income and, had straightaway applied rule 8D, then, in the absence of proximate relationship between the expenditure and the exempt income the disallowance made by him was rightly vacated by the Tribunal. 8. Accordingly, in the backdrop of our aforesaid observations, we are of the considered ....