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2015 (3) TMI 441 - AT - Income TaxDisallowance u/s 14A - CIT(A) deleting the disallowance - Held that:- Ld. CIT(A) has rightly observed that that Rule 8D will not be applicable to the case of the assessee since it pertains to AY 06-07. We also find that Ld. CIT(A) has also observed that Rule 8D cannot be applied retrospectively, Section 14A however would be applicable for pre Rule 8D period, thus whenever the issue of 14A arises the AO should ascertain the correctness of the claim of the assessee in respect of expenditure incurred or not incurred in relation to income which does not form part of the total income under the Act. Ld. CIT(A) noted that the AO is satisfied with the claim of the assessee and he further noted that the AO should accept the claim of the assessee so far as the quantum of disallowance is concerned. Ld. CIT(A) has further observed that the AO after giving the assessee an opportunity of being heard, is not satisfied with the correctness of the claim of the assessee, he should reject the claim after giving reasons and then AO should determine the amount of expenditure incurred in relation to income which does not form part of the total income. Ld. CIT(A) further observed that the language of sub section 14A(1) is abundantly clear that relation has to be seen between the exempt income and expenditure incurred in relation to it. The AO has not shown any relation between the exempt income and expenditure incurred. Therefore, Ld. CIT(A) has rightly held that the AO has not followed the directions of the ITAT and the Hon. High Court of Court of Delhi in the assessee's case and the AO has to consider the two cases of Godrej Boyce Mfg. Co. Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] and Maxopp Investment Ltd [2011 (11) TMI 267 - Delhi High Court] while deciding the issue, but the AO did not consider the two judgments while finalizing the matter. We find that Ld. CIT(A), in view of the above, has rightly deleted the addition made by the AO of ₹ 1,OO,94,103/- which does not need any interference on our part. Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the Appeal filed by the Revenue. - Decided in favour of assessee.
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