TMI Blog2016 (6) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... s as the AO deem it fit. In such circumstances the correctness of the AO’s judgment can be reviewed but it cannot be said that the AO had no jurisdiction to do so and AO ought to resort only to the provision of Rule 8D of the Rules. In other words Rule 8D is not automatic and can be resorted to by the AO only as a measure of last resort. For the reasons given above, We quash the order u/s 263 and allow the appeal of the assessee. - ITA No.1554/Kol/2013 - - - Dated:- 1-6-2016 - Shri N.V.Vasudevan, JM Shri M.Balaganesh, AM For The Appellant: Shri D.K.Kothari, FCA For The Respondent: Shri Rajat Subhra Biswas, CIT(DR) ORDER PER N.V.VASUDEVAN, JM: This is an appeal by the Assessee against the order dated 26.03.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO did not accept the aforesaid computation as made by the assessee. He however observed that the assessee was doing composite business and taking note of this aspect he estimated the expenditure pertaining to earning of exempt dividend income at ₹ 4,23,054/-. This constituted 10% of exempt dividend income. 4. The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO making disallowance u/s 14A of the Act was erroneous and prejudicial to the interest of revenue. According to CIT for A.Y.2008-09 Rule 8D of the Income Tax Rules, 1962 (Rules) was applicable and that rule provides the basis of making disallowance u/s 14A of the Act. According to CIT the AO ought to have made disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of revenue. 3. In view of the facts narrated above it is clear that the A.O. has failed to take notice of the above facts and failed to apply the relevant provisions of Section 14A read with Rule 8D . He has therefore failed to apply his mind and discharge his duty as an assessing officer during the scrutiny proceedings u/s. 143(3) of the LT. Act. Hence the order passed by the A.O. u/s.143(3) was erroneous in so far us it is prejudicial to the interest of revenue . 5. In response to the show cause notice issued by the CIT on lines indicated above the assessee submitted that the AO after considering the facts and all aspects has taken possible view for disallowance to be made u/s 14A of the Act and the CIT in exercise of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard the rival submissions. The provisions of section 14A as originally introduced and as amended from time to time as well as the insertion of Rule 8D was subject-matter of several decisions rendered by various Benches of the ITAT as well as the Hon ble High Courts. The Hon ble Delhi High Court in the case of Maxopp Investments Ltd. v. CIT 2011) 203 Taxman 364 (Del) and the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. 328 ITR 81 (Bom) have taken a view that Rule 8D of the I.T. Rules will apply only for A.Ys. 2008-09 and subsequent assessment years. It has also been laid down that the assessee has to make a claim (including a claim that no expenditure was incurred) with regard to expenditure incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. Rule 8D(2) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income. 10. For the reasons given above we are of the view that invoking of Rule 8D of Rules is not automatic and that the AO u/s 14A of the Act has the discretion to substitute the computation of disallowance u/s 14A as made by the assessee is under estimation. The satisfaction contemplated u/.s 14A (2) of the Act is not merely restricted to rejecting the claim made by the assessee and the disallowance to be made u/s 14A of the Act but also in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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