TaxTMI 
TaxTMI 
2025 (2) TMI 1435
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Act 1961 ("the Act"). The Appellant prays that the disallowance u/s.14A made by AU be restricted to suo moto disallowance made by the Appellant. 2. On the facts and in law, the CIT(A) erred in upholding disallowance made by AO u/s.14A while computing book profit u/s.115JB of the Act. The Appellant prays that it be held that while computing book profits u/s.115JB, only actual expenditure, if any for earning exempt income be added back and Rule 8D cannot apply." 3. There is a delay of 93 days noted by Registry in filing the present appeal before the Tribunal for which petition for condonation of delay along with affidavit is placed on record. Perusal of the same states that delay is attributable to change in the management staff of the assessee. We have considered the petition for condonation of the said delay along with an affidavit. Upon perusal of the same and hearing both sides, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay. Accordingly, we condone the delay to take up the matter for adjudication. 4. Twin issues involved in respect of disallowance made undersection 14A are towards disallowan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Rule 8D and computed further disallowance of Rs. 88,37,134/- by taking 1% of yearly average of monthly average of investments. In the course of assessment proceedings, assessee vide its submission dated 24.12.2020 stated that unless a satisfaction is recorded that the working provided by it is wrong/incorrect, Rule 8D cannot be applied. It placed reliance on several decisions to buttress its contention. Ld. Assessing Officer took note of objection raised by the assessee on the requirement of satisfaction to be recorded which according to him was recorded, there being insufficiency of computation by the assessee for disallowance made under section 14A. He thus computed disallowance at Rs. 88,37,134/-, calculated asper Rule 8D and restricted it to the amount of total exempt income earned by the assessee in the year at Rs. 72,84,630/- which was added to the total income assessed under normal provisions of the Act. Ld. Assessing Officer also made adjustment to book profit reported by the assessee under section 115JB by making an addition of Rs. 55,63,492/- for calculating Minimum Alternate Tax (MAT) after reducing the suo moto disallowance made by the assessee. 6. Before the Ld. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the submissions made before us as well as before the authorities below. Facts stated above are not in dispute. Contentions raised are already narrated above and hence not repeated for the sake of brevity and to avoid duplicity. We take note of the working of suo moto disallowance made by the assessee by taking into account salaries of concerned personnels and administrative expenses, details of which are reproduced above and reflects adoption of scientific approach. Ld. Assessing Officer has disregarded the same by merely stating that it is without any logic and reasoning. Furthermore, ld. Assessing Officer has accepted the suo moto disallowance made by the assessee as 'direct expenses' for the purpose of applying Rule 8D as noted in para 9 of his order. 7.1. Provisions of section 14A(2) requires the Assessing Officer to invoke Rule 8D only if he is not satisfied with the correctness of the claim of the assessee in respect of the expenditure, in relation to the exempt income having regard to the accounts of the assessee. Even Rule 8D postulates similar condition as mentioned in section 14A(2) wherein also the satisfaction to be arrived at by the ld. Assessing Officer on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfaction that having regard to the kind of the assessee, suo moto disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the Assessing Officer 7.6. Further, on the same issue, Hon'ble Supreme Court in Godrej &Boyce Manufacturing Company Ltd. v. DCIT, (2017) 394 ITR 449, observed 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. Sub-sections (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 appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isallowing of expenditure incurred to earn exempt income observed as under "Whether such determination is to be made on application of the formula prescribed under rule 8D or in best jusigment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not ssible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best dgment determination, as earlier prevailing, would become applicable." Thus, Rule 8D of the Rules cannot be invoked where the suo moto disallowance made by the respondent assessee is not found to be satisfactory by the Assessing Officer having regard to the accounts of the assessee, In the absence of recording the aforesaid fact of non- satisfaction in terms of Section 14A(2) of The Act, invocation of Rule 8D is not permissible. (e) Therefore, in view of the above decision of the Apex Court, this question also does not give rise to any substantial question of law. Thus....