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2021 (3) TMI 1100 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - assessee had made suo motu disallowance on proportionate basis by taking proportion of personnel and administrative expenses which can held to be relatable for earning of the exempt income - HELD THAT:- Admittedly, no interest expenditure is attributable for earning of exempt income. The only dispute is with regard to indirect expenditure under Rule 8D (2)(iii). Once the investment has been made in the earlier years and only if the dividend amount has been credited, then the only rational basis at the most could be the proportion of salary and administrative expenses. AO thereafter having regard to the accounts maintained by the assessee and the nature of expenses incurred was required to record his satisfaction that expenditure claimed by the assessee for earning of exempt income is incorrect or the expense disallowed by the assessee is not reasonable. It is only after recording of such satisfaction that Assessing Officer can proceed to make a disallowance under the prescribed method of Rule 8D and this is the mandate of Section 14A(2). In this case, the Assessing Officer has mechanically applied Rule 8D by stating that the expenditure incurred by the assessee towards exempt income, whether direct or indirect has to be disallowed in view of method provided under Rule 8D. There is no specific satisfaction of Assessing Officer as to how the claim made by the assessee is not tenable having regard to the nature of account maintained by the assessee and the nature of expenditure debited in the P&L account, especially when the dividend has come from old investments and not fresh investment. Exactly on the same reasoning, this Tribunal in assessee's own case for all the earlier years right from Assessment Years 2005-06 to 2011-12 has deleted the disallowance made under Rule 8D(2)(iii). Thus, respectfully following the precedent in assessee's own case for the earlier years, we do not find any reason to sustain the disallowance which has been made by the Assessing Officer by mechanically applying Rule 8D. Accordingly, the appeal of the assessee is allowed.
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