TMI Blog2017 (11) TMI 1929X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D. A perusal of assessment order reveals that the Assessing Officer at the outset asked the assessee to furnish explanation as to why proportionate amount of interest expenditure should not be disallowed under Rule 8D r.w. section 14A of the Act, instead of first examining the suo-moto disallowance made by assessee and seeking explanation from the assessee the manner of computation of such disallowance. The Assessing Officer proceeded on the premise as if disallowance u/s. 14A r.w. Rule 8D is automatic irrespective of the genuineness of claim made by assessee. In the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset Management Ltd. [ 2017 (10) TMI 177 - BOMBAY HIGH COURT ] has held that where Assessing Officer has not commented upon the correctness or otherwise of the assessee s working of expenditure, formula prescribed in Rule 8D(2)(iii) could not have been applied to work out disallowance u/s. 14A. Hon ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. [ 2017 (2) TMI 1005 - BOMBAY HIGH COURT ] held that the Assessing Officer is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not for trading or earning of dividend income. The assessee made investment in the shares of aforesaid company in the Financial Year 1994-95. The assessee received dividend income from investment in the shares of sister concern, however, earning of such dividend was incidental to the investment. The ld. AR contended that the assessee was having own interest free sufficient funds for making strategic investment in the group concern. The assessee during assessment years under appeal had made suo-moto disallowance u/s. 14A. The Assessing Officer without recording reasons for rejecting assessee s suo-moto disallowance u/s. 14A and without recording objective satisfaction made substantial disallowance u/s. 14A r.w. Rule 8D in the assessment years under appeal. The Assessing Officer has not given specific finding as to why suo-moto disallowance made by assessee is insufficient. The assessee raised specific ground before the First Appellate Authority against the manner of disallowance made by Assessing Officer without recording satisfaction. The Commissioner of Income Tax (Appeals) rejected the contentions of the assessee by holding that it is not eminating from the submissions of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,24,98,032/- 4,43,316/- 1,01,86,592/- 2011-12 13,56,23,646/- 5,28,048/- 1,18,34,013/- 6. The Assessing Officer made disallowance u/s. 14A by invoking the provisions of Rule 8D(2)(ii) and 8D(2)(iii). In first appeal the Commissioner of Income Tax (Appeals) deleted disallowance made under the provisions of Rule 8D(2)(ii) and confirmed disallowance under Rule 8D(2)(iii). The assessee in appeal before Tribunal has assailed the Assessing Officer s action of invoking the provisions of Rule 8D without recording satisfaction. 7. Before proceedings to decide this issue it would be relevant to first refer the relevant provisions of section 14A of the Act. Expenditure incurred in relation to income not includible in total income. 14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. The Commissioner of Income Tax (Appeals) rejected the contentions of assessee by observing as under : 5.7. ..The fact that the appellant had considered certain amount as disallowable does not come out from the appellant s submissions reproduced in the asst order. It appears from the asst order that before the AO the appellant assessee had claimed that no expenditure was incurred to earn the dividend income. The AO has discussed the issue of applicability of Rule 8D in great detail in his order. Thus the satisfaction of the AO regarding applying Rule 8D is there. To support his reasoning, the Commissioner of Income Tax (Appeals) placed reliance on the decision of Pune Bench of Tribunal in the case of Lap Finance Consultancy Pvt. Ltd. in ITA Nos. 1522 to 1525/PN/2013 decided on 06-11-2015. 10. We find that the Commissioner of Income Tax (Appeals) has erred in coming to conclusion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D. We further observe that reliance placed by the Commissioner of Income Tax (Appeals) on the decision of Co-ordinate Bench of the Tribunal in the case of Lap Finance Consultancy Pvt. Ltd. (supra) is misplaced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 6. Thus no fault can be found with the impugned order of the Tribunal holding that the AO should show fallacies in the computation of disallowance done by the respondent-assessee. Thus, there is no reason to discard the disallowance done by the respondent-assessee. 13. The Hon ble Jurisdictional High Court in a recent decision in the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset Management Ltd. reported as 86 taxmann.com 200 has held that where Assessing Officer has not commented upon the correctness or otherwise of the assessee s working of expenditure, formula prescribed in Rule 8D(2)(iii) could not have been applied to work out disallowance u/s. 14A. 14. Thus, in view of the facts of the case and the ratio laid down by Hon ble Jurisdictional High Court, we are of considered view that the Assessing Officer has made disallowance u/s. 14 r.w. Rule 8D in violation of the provisions of sub-section (2) to section 14A. Hence, the disallowance made by Assessing Officer is not sustainable. Accordingly, ground Nos. 2 and 3 raised in the appeal by the assessee in all the assessment years under appeal are allowed. 15. The ld. AR of the assessee has stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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