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2021 (8) TMI 118 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - HELD THAT:- AO, without recording objective satisfaction as to why the assessee’s computation were not acceptable, proceeded to compute disallowance as per Rule 8D. It is settled legal position that the application of Rule 8D is not automatic as held by Hon’ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. V/s DCIT [2017 (5) TMI 403 - SUPREME COURT]. Upon perusal of assessment order, we find that Ld. AO has failed to record any objective satisfaction as to why the assessee’s stand was not acceptable having regards to the accounts of the assessee as per the mandate of Sec.14A. This jurisdictional requirement was not satisfied by Ld. AO in the present case and Ld.AO straightway proceeded to compute disallowance as per Rule 8D. The application of Rule 8D, in our considered opinion, was not mechanical or automatic. AO has mechanically applied the provisions of Rule 8D(2)(iii) while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year. In the absence of such recorded satisfaction, the additional disallowance as made in assessment order could not be sustained in the eyes of law. Accordingly, we are inclined to delete the additional disallowance as made by Ld. AO while computing income under normal provisions as well as while computing Book Profits u/s 115JB.
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