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2016 (7) TMI 905 - AT - Income TaxDisallowance under Rule 8D(iii) r.w.s. 14A - non recording of requisite satisfaction before making the disallowance - Held that:- AO has to record the satisfaction having regard to its books of account. In our view AO has not recorded the requisite satisfaction before making the disallowance u/s. 14A(2) of the Act. We also find that from the Memorandum Explaining the provision of Finance Bill, 2006 and CBDT in its Circular dated 28 of 2006 states that since the existing provision of Sec. 14A did not provide a method of calculating the expenditure incurred in relation to income which did not form part of the total income of assessee. There was a considerable dispute between the taxpayers and the Department for determining such expenditure as per section 14A of the Act. It was in this background, that sub-section (2) of Sec. 14A of the Act was inserted so as to provide an uniform method applicable in the situations where Assessing Officer is not satisfied with the correctness of the claim of assessee and such sub-section (3) of Sec. 14A of the Act clarify that the application of method would be attracted even under a situation where the assessee claimed that no expenditure at all was incurred in relation to earning of non-taxable income. In our considered view, it was necessary for the AO to arrive at applying the provision of the Act 14A of the Act to record the ‘satisfaction’ after having regard to its books of account. - Decided in favour of assessee
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