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2011 (8) TMI 1193 - AT - Income TaxDisallowance u/s 14A - Held that:- The application of Rule 8D of the Rules is not automatic. When the assessee makes the claim regarding the quantum of expenses to be disallowed in terms of section 14A of the Act, it was incumbent on the part of the AO to consider the claim of the assessee. It is only when the AO is not satisfied with the claim of the assessee he can have recourse with the provisions of Rule 8D of the Income Tax Rules. The satisfaction that the claim made by the assessee regarding expenses incurred in relation to the income which does not form part of the total income under the Act, is not correct, has to be arrived at by the AO, on an objective basis. In the present case, we find that the AO has proceeded to apply Rule 8D without giving any finding with regard to the correctness of the claim made by the assessee regarding the disallowance to be made under section 14A of the Act. The CIT(A) has also proceeded on the same basis. We are, therefore, of the view that the orders of the CIT(A) has to be set aside and the issue should be remanded to the AO for fresh consideration.
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