TMI Blog2012 (7) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee - Assessing Officer has proceeded to apply Rule 8D without giving any finding with regard to the correctness of the claim made by the assessee regarding the disallowance to be made u/s 14A of the Act. The CIT(A) has also proceeded on the same basis - matter is remitted to the file of the Assessing Officer - appeal filed by the department allowed for statistical purposes. - ITA No. 5516/Del./2011 - - - Dated:- 12-6-2012 - SHRI U.B.S. BEDI, AND SHRI A.N. PAHUJA, JJ. Assessee by : Shri None Revenue by : Shri A.K. Singh, Sr. DR ORDER PER U.B.S. BEDI, J.M. This appeal of the Revenue is directed against the order passed by the CIT (A)-V, New Delhi, dated 21.10.2011, relevant to assessment year 2008-09, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f disallowed Rs.66,255/- against expenses attributable towards earning the exempted income u/s 14A of the I.T. Act, 1961 read with Rule 8D of I.T. Rules. It was further submitted that disallowance u/s 14A can only be invoked where Assessing Officer is not satisfied with the correctness with the claim of expenditure made by the assessee or no expenditure has been incurred. Disallowance u/s 14A cannot be made for an amount more than incurred for earning the exempted income. Therefore, it is necessary to work out the actual expenses incurred in this regard. No hypothetical formula for calculating the expenses can be applied. Therefore, interest payment which has got no relation with the investment, cannot be disallowed. Similarly, any ad hoc p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case now is assessment year 2008-09. The ITAT, Mumbai B bench in I.T.A. No.1050/Mum/2010 (for assessment year 2008-09) in the case of Multi Commodity Exchange of India Ltd. after consideration of the Hom ble Bombay High Court in the I.T.A. No.626 of 2010 in the case of Godrej Boyace Mfg. Co. Ltd., Mumbai vs. DCIT, Range 10(2), Mumbai Anr. 328 I.T.R. 81 (Bom.) has held as follows: 12. It is clear from the observations of the Hon ble Bombay High Court referred to above that the application of Rule 8D of the Rules is not automatic. When the assessee makes the claim regarding the quantum of expenses to be disallowed in terms of section 14A of the Act, it was incumbent on the part of the Assessing Officer t consider the claim of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the claim of the appellant that disallowable expenses was only Rs.66,255/-. It is clear that the Assessing Officer cannot apply Rule 8D automatically but can do so only where he records satisfaction on an objective basis that the assessee is unable to establish the correctness of its claim. In absence of any finding by Assessing Officer, the facts of the case, the fact that there is no power vested with the CIT(A) to set aside the issue to the Assessing Officer for fresh consideration of the issue, I am unable to sustain the addition of Rs.14,13,064/- made by the Assessing Officer and direct the Assessing Officer to limit the same to Rs.66,255/- calculated by the appellant. 5. Aggrieved by the order of CIT(A), department has filed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for Assessing Officer to determine amount of expenditure incurred in relation to exempt income is that he must record his dissatisfaction with correctness of claim of expenditure made by assessee or with correctness of claim made by assessee no expenditure has been incurred. Held, yes Whether therefore, determination of amount of expenditure in relation to exempt income under rule 8D would only come into play when Assessing Officer rejects claim of assessee in this regard Held, yes Whether rule 8D, which was introduced by virtue of Notification No. 45/2008, dated 24.3.2008, is prospective in operation and cannot be regarded as being retrospective Held, yes Whether though sub-sections(2) and (3) of section 14A were introduced w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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