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2015 (6) TMI 1086 - AT - Income TaxAd-hoc disallowance at the rate of 5% of the total expenditure - Held that:- All the expenses were incurred against bills and for commercial expediency, thus, no disallowance is expected to be made u/s 37(1) of the Act. The assessee is a institution, thus, no ad-hoc addition is permitted unless and until it is proved otherwise. There is no recording of satisfaction by the Assessing Officer that the assessee made a bogus claim. There are no borrowed funds also, thus, to put an end to litigation, the disallowance is restricted to 2% against 5% sustained by the ld. Commissioner of Income Tax (Appeals). It is made clear that the observation made by the Bench is peculiar to the facts available to the impugned assessment year and may not be quoted for further reference. This ground of the assessee is partly allowed Ad-hoc disallowance made towards estimated expenses - addition u/s 14A - Held that:- Rule-8D of the Rules can be applied, if the Assessing Officer is not satisfied with the correctness of the claim of the assessee with respect to the expenditure incurred in relation to exempt income. Even if, the assessee claims that no expenditure was incurred in respect to exempt income, the Assessing Officer is supposed to follow the mandate of Rule-8D. Section 14A is called for when the Assessing Officer is not satisfied with the claim of the assessee having incurred no expenditure or some amount expenditure in relation to exempt income. Therefore, following the decision of jurisdictional High Court in Godrej & Boyce, (2010 (8) TMI 77 - BOMBAY HIGH COURT ), wherein, it was held that the disallowance has to be on reasonable basis, therefore, to put an end to the litigation, I direct the ld. Assessing Officer to reduce the disallowance to ₹ 1 lakh in place of ₹ 3,41,763/- sustained by the ld. Commissioner of Income Tax (Appeals).
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