TaxTMI 
TaxTMI 
2024 (5) TMI 1665
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....rn of income was incorrect, the order of the Ld. CIT(A) confirming the said disallowance of Rs. 2,93,27,456 was erroneous. 3. On the facts and circumstances of the case and in law, assuming without admitting that Rule 8D is applicable and can be invoked the appellant submits that: - (a) Since no income was received by the appellant from its subsidiaries, the value of investments held by the appellant in its subsidiaries are not includible in arriving at the monthly averages of the opening and closing balances of investment under the said Rule. (b) Since the income earned by the appellant in mutual fund units held under growth schemes are taxable, the value of investments held by the appellant in mutual fund units under growth schemes are not includible in arriving at the monthly averages of the opening and closing balances of investment under the said Rule. 4. On the facts and in the circumstances of the case and in law the appellant submits that the Ld. Assessing Officer erred in levying interest u/s 234C on the assessed income when the provisions of Section 234C of the Act only empower him to charge interest on the returned income. 5. ....
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....ment of disallowance u/s 14A of the IT Act from Rs. 1,20,835/- (suo-moto computed by appellant to Rs 2,93,27,456/- computed by assessing officer(AO) in accordance with Rule 8D of the IT Rules. 6. All the submissions made by the appellant including the judicial references cited are perused with care along with the contents of the assessment order. As already stated, the issue is with regard to reworking of disallowance u/s 14A of the IT Act u/r 8D of the IT Rules by the AO as against that working provided by assessee and the appellant contended that AO had not recorded any satisfaction before invoking the said Rule. To give effect to the provision of Section 14A and in particular subsection (2) thereof, Rule 8D of the Rules provides the method for determining the amount of expenditure in relation to the income not includable in the total income. Sub-rule (1) echoes the provision of subsections (2) and (3) of Section 14A where it provides that if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the expenditure or the claim made is that no expenditure has been incurred in relation to the income ....
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....ed or did not record cogent reasons for his dissatisfaction to reject the AO's conclusion. To insist that the AO should pay such lip service regardless of the substantial compliance with the provisions would, in fact, destroy the mandate of Section 14A. 9. Having regard to these facts, this Court is satisfied that the disallowance which is otherwise in accord with Rule 8D(c) was justified. No substantial question of law arises. The appeal is dismissed. In the case of Devarsons Industries (P.) Ltd. v. ACIT (OSD), 84 taxmann.com 244 (Gujarat), the hon'ble high court of Gujarat held that Where Assessing Officer gave detailed reasons for making disallowance under section 14A in respect of exempt dividend income and LTCG earned by assessee discarding assessee's theory that to earn assessable income assessee incurred no expenditure whatsoever, mere fact that Assessing Officer did not arrive at satisfaction in a particular manner while making said disallowance, would not per se destroy mandate of section 14A. Hence there is no force in the contention of the appellant as the AO had rightly invoked the Rule 8D of the IT Rules to work out the quantum of....
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....Assessing Officer for invoking Rule 8D has taken the basis of Rule 8D only and not independently examined the correctness of claim of expenditure of the assessee of Rs. 1,20,835/- towards earning exempted income and not recorded any express or implied dissatisfaction to claim of assessee keeping in view the accounts of the assessee. In the case of India Bulls Financial Services Ltd. (supra), the Hon'ble Court held that implied dissatisfaction is suffice for invoking section 14A of the Act but in the case even there is no implied dissatisfaction by the Assessing Officer and he has only mentioned that disallowance was not computed by the as per Rule 8D of Rules. Similarly, in the case of Devarsons Industries (P.) Ltd. (supra), Hon'ble Court held that the Assessing Officer did not arrive at satisfaction in a particular manner while said disallowance, which would not per se destroy mandate of section 14A. In the instant case, the Assessing Officer has not recorded any kind of dissatisfaction as to the correctness of claim of expenditure of the assessee. Before us, the Ld. counsel for the assessee relied on the decision of the Hon'ble Bombay High Court in the case of Pr. CIT....
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....aim made by the assessee. The Assessing Officer has to first consider the correctness of the claim of the assessee having regard to the accounts of the assessee. The satisfaction of the Assessing Officer has to be objectively arrived at on the basis of those accounts and after considering all the relevant facts and circumstances. The application of the prescribed method arises in a situation where the claim made by the assessee in respect of expenditure which is relatable to the earning of income which does not form part of the total income under the Act is found to be incorrect. In such a situation a method had to be devised for apportioning the expenditure incurred by the assessee between what is incurred in relation to the earning of taxable income and that which is incurred in relation to the earning of non-taxable income. As a matter of fact, the memorandum explaining the provisions of the Finance Bill 2006 and the CBDT circular dated 28 December 2006 state that since the existing provisions of Section 14A did not provide a method of computing the expenditure incurred in relation to income which did not form part of the total income, there was a considerable dispute between ta....