2016 (7) TMI 1658

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.... 2. Let us first take up the assessee's appeal I.T.A. No. 406/Mds/2016. 3. The only issue arises for consideration is disallowance of Rs. 2,51,498/-. 4. Shri R. Sivaraman, ld. Counsel for the assessee submitted that during the year under consideration the assessee has received dividend of Rs. 41,38,052/-. The assessee has disallowed expenses u/s 14A to the extent of Rs. 67,829/-. The Assessing Officer has computed the disallowance u/s 14A r.w.r 8D to the extent of Rs. 2,51,498/-. According to the ld. Counsel, the Assessing Officer has not recorded the satisfaction in the assessment order, therefore, there cannot be any disallowance. The ld. Counsel submitted that application of Rule 8D is not automatic. According to the ld. Counsel, ....

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....as to be inferred from the observation made by the Assessing Officer in the computation made. When the Assessing Officer found there was a direct expenditure relating to earning of the exempted income and the assessee has not computed the disallowance under Rule 8D, this Tribunal is of the considered opinion that the Assessing Officer was not satisfied with regard to the claim made by the assessee. Therefore, the Assessing Officer has to recompute the disallowance by applying the procedure prescribed under Rule 8D. The average investment made during the year under consideration is not in dispute. The direct expenditure incurred by the assessee to the extent of Rs. 67,829/- for earning the income which do not form part f the total income is ....