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2014 (2) TMI 661 - AT - Income TaxEnhancement of disallowance u/s 14A of the Act – Dividend income - Held that:- The decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the satisfaction of the Assessing Officer with regard to the correctness or otherwise of the claim made by the assessee must be based on reasons and on relevant considerations - the invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is to be understood as being conditional on the objective satisfaction of the Assessing Officer with regard to the incorrectness of the claim of the assessee, having regard to the accounts of the assessee - Also in Maxopp Investment Ltd. & Ors. vs. CIT [2011 (11) TMI 267 - Delhi High Court ] - the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income in term of rule 8D of the Rules would be triggered only if the Assessing Officer records a finding that he was not satisfied with the correctness of the claim of the assessee in respect of such expenditure. The assessee made detailed submissions to the Assessing Officer that the determination of disallowance u/s 14A of the Act was based on the employee costs and other costs involved in carrying out this activity - assessee also explained that the shares which have yielded exempt income were acquired long back out of own funds and no borrowings were utilized - All the points raised by the assessee have not been addressed by the Assessing Officer and the same have been brushed aside by making a bland statement that the disallowance is "not acceptable" - the Assessing Officer has not recorded any objective satisfaction in regard to the correctness of the claim of the assessee, which is mandatorily required in terms of section 14A(2) of the Act and therefore his action of invoking rule 8D of the Rules to compute the impugned disallowance is untenable – thus, the order set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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