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2016 (3) TMI 1218 - ITAT KOLKATA

2016 (3) TMI 1218 - ITAT KOLKATA - TMI - Revision u/s 263 - disallowance u/s.14A computation - AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules - Held that:- While examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoking the method of disallowance of expenses as prescribed by Rule 8D(2) of the Rules. It .....

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ore be said that once the AO rejects the mode of computation of disallowance u/s.14A of the Act as made by the Assessee, he has no other option but to resort to Rule 8D of the Rules. - Besides the above, we are also of the view that the AO has adopted one of the possible course open to him in law. The CIT cannot invoke jurisdiction u/s.263 of the Act just because he does not agree with the view of the AO. As u/s.263 of the Act, the CIT cannot substitute his view with that of the AO. The orde .....

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T, Kolkata-III, Kolkata, passed u/s.263 of the Income Tax Act, 1961 (Act) relating to AY 2008-09. 2. The Assessee is a company. It is engaged in the business of manufacturing and trading of bakery products. For AY 2008-09 the Assessee filed return of income on 29.9.2008 declaring total income of ₹ 99,74,64,581/-. In the course of assessment proceedings u/s.143(3) of the Act, the AO noticed that the Assessee had on his own disallowed a sum of ₹ 26,07,177/- u/s.14A of the Act, being ex .....

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mium Manager Salary 789,443 50% thereof ₹ 443,472 443,472 Travelling 75,000 Telephone 18,000 Medical Premium 4,500 Treasury Head Salary 6,570,211 25% thereof ₹ 1,670,928 1,670,928 Travelling 100,000,9000 Telephone Medical 4,500 Total Premium 8,063,432 2,60,178 3. The AO was of the view that the calculation given by the Assessee was reasonable. He however was of the view that the time devoted by the Treasure head towards monitoring of investments and maintaining accounting records the .....

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e CIT in exercise of his powers u/s.263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue. According to him once the basis of estimation of disallowance as done by the Assessee is not accepted by the AO, than the AO has no other option but to resort to make disallowance in accordance with Rule 8D of the Income Tax Rules, 1962 (Rules) and he could not substitute the estimation of the Assessee by his own estimation. 4.1. To t .....

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O should mandatorily resort to Rule 8D of the Rules for making disallowance u/s.14A of the Act. Reference was made to the decision of ITAT Kolkata in the case of Balarampur Chini Mills Ltd. Vs. DCIT ITA No.504/Kol/11 dated 29.7.2011 for AY 2008-09. 4.2. The CIT however held that if the AO was not satisfied with the method of disallowance u/s.14A of the Act as done by the Assessee he has no other option but to resort to make disallowance in accordance with Rule 8D of the Rules. He set aside the o .....

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owance to be made u/s.14A of the Act was debatable and therefore no powers of revision can be exercised u/s.263 of the Act on such issue. The learned DR relied on the order of the CIT. 7. We have given a careful consideration to the rival submissions. The provisions of section 14A of the Act 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 Court .....

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not chargeable to tax. Such a claim has to be examined by the AO and only if on an objective satisfaction arrived at by the AO that the claim made by the assessee is not correct, can the AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules. If the AO comes to the conclusion that claim made by the assessee is not correct, it is only thereafter that the AO can proceed to make the disallowance in terms of Rule 8D of the Rules. Even in a case where the AO rejects the cla .....

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