TMI Blog2016 (2) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... e exempt income in the form of dividend as admittedly the said dividend income was earned out of auto swap funds which was done directly by the bank without any interference from the side of the assessee. Hence there was no need for the assessee to incur any expenditure thereon for earning the dividend income. We find that the Learned AO rejected the claim of assessee with regard to claim of assessee that no expenditure was incurred in relation to exempt income without indicating any cogent reasons for the same. We find that the Learned AO had straight away embarked upon computing disallowance under Rule 8D(2)(iii) of the Rules. Hence we hold that the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules is not apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's account. The entire dividend income of ₹ 1,31,451/- was earned only out of this auto swap account from mutual funds. During the course of assessment proceedings, the Learned AO observed that the assessee had made investment in shares of ₹ 62,32,50,000/- during the year and based on this he directly proceeded to apply the second and third limb of Rule 8D(2) of the IT Rules and made disallowance u/s 14A of the Act. By applying the second limb of Rule 8D(2)(ii) of the Rules, a disallowance of ₹ 7,28,598/- was made which was deleted by the Learned CITA on first appeal and against which the revenue has not preferred second appeal before us. By applying the third limb of Rule 8D(2)(iii) i.e 0.5% of average valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T vs Champion Commercial Co. Ltd reported in 139 ITD 108 (Kol ITAT). 5. We have heard the rival submissions and perused the materials available on record including the case laws relied upon by both the sides. We find that the only issue to be decided in this appeal is as to whether the recording of satisfaction in terms of Rule 8D(1) of the Rules is mandatory or not by the Learned AO before proceeding further to Rule 8D(2) of the Rules. We find from the facts of the instant case that the Learned AO has though had examined the accounts of the assessee with regard to the availability of own funds in the context of making separate disallowance of interest on borrowed capital u/s 36(1)(iii) of the Act, did not look into the accounts of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 8D of the Rules on presuming the average value of investment at % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT (A) . CIT vs R.E.I. Agro Ltd in GA 3022 of 2013 in ITAT 161 of 2013 dated 23.12.2013 rendered by Calcutta High Court which approved the findings of this tribunal which was relied upon by the Learned AR The Assessing Officer also disallowed the expenditure under section 14A of the Income Tax Act, 1961 without first recording that he was not satisfied with the correctness of the claim as regards the claim that no expenditure was made by the assessee. Challenging the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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