TaxTMI 
TaxTMI 
2022 (8) TMI 1529
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....ction 14A of the Income Tax Act, 1961 (the Act) read with Rule 8D while computing the income under the normal provisions of the act as well as book profits under section 115JB of the Act. 3. The ld. Counsel for the assessee submits that assessee during the assessment year under consideration received dividend income and claimed as exempt. Assessee also made suo moto disallowance of Rs. 35,99,786/- under section 14A read with Rule 8D of the Act. The ld. Counsel submits that the suo moto disallowance of Rs. 35,99,786/- made by the assessee consists of direct expenses of Rs. 6,27,144/- under Rule 8D(2)(i) and Rs. 29,72,642/- under Rule 8D(2)(iii) being expenses other than interest on borrowing reasonably regarded as expenses incurred in relat....
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....e employees to report. The ld. Counsel submits that the management of such staff on cost to company basis as also the portion thereof reasonably attributable to the activity of investment was annexed to the report which is at page No. 24 and the expenditure attributable to investment activity was arrived at Rs. 22,80,293/-. The ld. Counsel for the assessee further submits that apart from the emoluments that are incurred for such personnel other expenses that can be directly or indirectly attributable to such personnel are also identified. Based on the overall expenses of the company which are duly allocated to such personnel based on well accepted principles of cost allocation and the total of such expenses was arrived at Rs. 6,92,349/- whi....
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....2)(iii) of I. T. Rules. The assessee contends that there is no objective satisfaction recorded by the Assessing Officer on the suo moto disallowance made by the assessee before invoking Rule 8D. We observe that the dispute is only with regard to the managerial expenses disallowable under Rule 8D(2)(iii). We observe that the assessee made suo moto disallowance allocating the expenses based on designation and the emoluments of employees on a cost to company basis as well as portion thereof reasonably attributable to the investment activity as under:- "Statement showing emoluments of members of FAD on a cost-to-company basis as welf as portion thereof reasonably attributable to the Investment activity Sr. No, Employee Designation Emolumen....
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.... to compute disallowance is under Rule 8D(2)(iii). Here we observe that provisions of section 14A of the Act contemplates recording of satisfaction by the Assessing Officer having regard to the accounts of the assessee if he is not satisfied with the claim of the assessee in respect of expenditure in relation to income which does not form part of total income. On reading of the assessment order, we find that the Assessing Officer having regard to the suo moto disallowance made by the assessee has not recorded any objective satisfaction as to why the allocation of indirect expenses made by the assessee is not sufficient to meet the expenses attributable for earning exempt dividend income. 10. In the case of Maxopp Investment Ltd. Vs. CIT [2....