TMI Blog2012 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon’ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd (2010 (8) TMI 77 - BOMBAY HIGH COURT) is correct as disallowance u/s 14A. Rule 8D is not retrospective. Rule 8D applicable from Assessment Year 2008-09 – in favour of assessee. Disallowance made by the AO u/s.14A as per Rule 8D – Held that:- Disallowance u/s.14A is called for when the AO is not satisfied with the assessee’s claim of having incurred no expenditure or some amount of expenditure in relation to exempt income - satisfaction of the AO as to the incorrect claim made by the assessee in this regard is sine qua non for invoking the applicability of Rule 8D - computing disallowance u/s.14A as per Rule 8D without rendering any opinion on the correctness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief was allowed in the first appeal. 4. Having heard the rival submissions and perused the relevant material on record, it is observed that the assessee wrote off the said sum as bad and doubtful debts. It is further the case of the assessee that the amount represents unrecoverable earnest money deposits, which were made by it in earlier years and written off in the current year due to non-recovery. In this view of the matter, this amount cannot be considered as bad and doubtful debts. The ld. AR has fairly conceded this issue by claiming it as a business loss. At this stage it is relevant to note that the criteria for allowing deduction in respect of bad debts is different from that of business loss. Deduction on account of bad debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order is set aside and the matter is restored to the file of AO. We order accordingly and direct the AO to give one more opportunity to the assessee to lead evidence in support of its claim about the amounts having been given as advances in the course of its business and about the said parties having refused to refund the earnest money deposits. If the assessee still fails to lead evidence, then the AO will be at liberty to confirm the addition. 6. In the result, the appeal is allowed for statistical purposes. A.Y. 2007-08: (Revenue s appeal): 7. The Revenue is aggrieved against the direction given by the ld. CIT(A) to the AO to recompute the disallowance u/s. 14A on a reasonable basis by relying on the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the instant case, it is noticed that the ld. CIT(A) has directed the AO to work out the amount disallowable u/s.14A in consonance with the judgment of the Hon ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra). The said judgment still holds the field inasmuch as no material has been brought to our notice that the appeal of the Revenue against the said judgment has not been disposed of by the Hon ble Supreme Court in either way. We, therefore, approve the view taken by the ld. CIT(A) in restoring the matter to the file of AO for computing the disallowance u/s.14A in conformity with the aforenoted judgment of the Hon ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra). 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, there is no dispute on the fact that Rule 8D is applicable w.e.f. assessment year 2008-09. Presently, we are dealing with the assessment year 2008-09 and resultantly Rule 8D is to be applied. However, it has been contended by the ld. AR that sufficient material was placed before the AO in support of its claim of not having incurred any interest expenditure in respect of the exempt dividend income. From the assessment order, it can be seen that the AO has categorically recorded Assessee s submission is kept on record . There is no discussion whatsoever on the submissions so made on behalf of the assessee in this regard. 14. At this juncture, it will be relevant to note that section 14A provides that no deduction shall be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low the mandate of Rule 8D if he is not satisfied with the correctness of the assessee s claim. To put it simply, the further disallowance u/s.14A is called for when the AO is not satisfied with the assessee s claim of having incurred no expenditure or some amount of expenditure in relation to exempt income. Satisfaction of the AO as to the incorrect claim made by the assessee in this regard is sine qua non for invoking the applicability of Rule 8D. Such satisfaction can be reached and recorded only when the claim of the assessee is verified. If the assessee proves before the AO that it incurred a particular expenditure in respect of earning the exempt income and the AO gets satisfied, then there is no requirement to still proceed with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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