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2019 (4) TMI 508 - AT - Income TaxDisallowance u/s. 14A - mandation of recording of satisfaction as envisaged u/s. 14A(2) and (3) as pre-condition before making any disallowance under Rule 8D - HELD THAT:- It is a well settled law that road to Rule 8D passes through section 14A(2) and (3) of the Act. Thus, recording of satisfaction as envisaged u/s. 14A(2) and (3) is a mandatory pre-condition before making any disallowance under Rule 8D. The law has been laid down in an unambiguous manner in the case of Godrej & Boyce Manufacturing Company Limited Vs. Deputy Commissioner of Income Tax & Anr. [2017 (5) TMI 403 - SUPREME COURT OF INDIA]. The manner of recording of satisfaction has not been laid down either under the Act or the Rules. The manner of recording satisfaction by the AO whether it conforms to the provisions of section 14A is a subjective assessment. The basic requirement is that the AO should express in his satisfaction the reasons for disagreeing with assessee qua suo-moto non disallowance/insufficient disallowance of expenditure incurred towards earning income exempt from tax. In the present case, the Assessing Officer before invoking the provisions of Rule 8D has issued show cause to the assessee. The assessee gave detailed reply citing various decisions. The Assessing Officer after considering the reply of assessee negated the same giving reasons and thereafter made disallowance under Rule 8D. After perusal of the assessment orders for the impugned assessment years, it is satisfied that the AO has recorded his satisfaction as envisaged u/s. 14A(3). No merit in the submissions and grounds raised by the assessee assailing the invoking of provisions of section 14A. - Decided against assessee.
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