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2014 (6) TMI 597 - AT - Income TaxDisallowance u/s 14A of the Act – Nexus between the expenses debited and the exempt income - Held that:- Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] - if no expenditure is found to have been incurred for earning exempt income, disallowance u/s 14A could not be made by the AO - Sub-section (3) of Section 14A further extends the scope of sub-section (2) and the AO is required to record the similar finding even where the assessee claims that no expenditure has been incurred by him in relation to the exempt income- the AO has to record his satisfaction as required by sub-section (2) & (3) of Section 14A, is accepted. CIT(A) while exercising his appellate jurisdiction has exercised his co-terminus power with that of AO and has recorded his dissatisfaction with the correction of the claim of the assessee that no expenditure was incurred in relation to income which does not form part of the total income under the Act - the assessee is not forthcoming with the expenditure incurred by it to earn to exempt income, a procedure has been prescribed by the statute which has been followed in this case and the disallowance has been calculated as per the prescribed method envisaged in Rule 8D and the assessee has failed to show any mistake in the calculation made under the Rule so the order need not be disturbed. Even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the Act, the officer exercising jurisdiction, while assessing the assessee will have to verify the correctness of the claim - If the assessee’s reply/ explanation are not acceptable for the authorities then it shall state reasons and after recording his dissatisfaction, shall reject the claim - the authorities have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the Act - CIT(A) exercised his co-terminus power and after recording his dissatisfaction as to the claim of the assessee in respect to expenditure in relation to exempt income has computed the expenditure as provided under Rule 8D as one-half percent of the average value of the investment, income which does not form part of the total income, is taken - The AY under consideration is 2008-09 and Rule 8D was applicable - the AO and CIT(A) has computed the disallowance under Rule 8D and as per formula provided under Rule 8D, the disallowance worked out to Rs. 13,82,741 - CIT(A) in exercise of his co-terminus powers has recorded satisfaction as envisaged u/s 14A and the assessee is not able to point out any mistake in the disallowance made under Rule 8D and since the disallowance under Rule 8D, had been worked out as per the formula given in the Rules, the order of the CIT(A) is upheld – Decided against Assessee.
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