TMI Blog2016 (5) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... 2). The legislature in its wisdom specifically envisages Assessing Officer s satisfaction before invoking expenditure disallowance that an assessee s books are not correct so far as they do not record any expenditure. We quote this statutory provision as well as the above stated case law that there has to be an explicit satisfaction and an Assessing Officer cannot simply brush aside the relevant books of accounts. Any violation thereof, in our considered opinion, would violate the legislative intent as well the legislation itself. CIT(A) s reasoning goes contrary to section 14A(2) as interpreted by various high courts hereinabove. The impugned administrative expenditure disallowance made by both the lower authorities under Rule 8D(iii) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see inter alia pleaded sufficient interest free funds, explained source of its investments in 9% convertible preferential shares of M/s. Whitefield Chemtek Pvt. Ltd. of ₹ 8 crores to repayment of inter corporate/interest free deposits and attributed the same source of investments made in 12% convertible preference shares of M/s. Sierra Investments. Similar plea was taken for investment for other securities of various companies to the tune of ₹ 87,93,506/-. We find that the assessee had purchased these investments in preceding assessment years. The Assessing Officer in assessment order partly accepted the above stated contentions qua the direct expenditure relating to tax free investments as well as on the issue of proportion int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant's contention that no expenditure has been incurred for earning the dividend income is not acceptable in view of the fact that certain activities have taken place as regards to investment in shares during the current year as accepted by the appellant. The appellant has not maintained any separate account of the expenses made for the purposes of earning the dividend income. So far as appellant s claim regarding appellate order for Assessment Year 2007-08 is concerned, it may be mentioned here that Rule 8D was not applicable for that year and hence a reasonable amount was held as disallowed. But for the current year, Rule 8D is applicable as held by owner Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pports the CIT(A) s reasoning extracted hereinabove. We have given our thoughtful consideration to rival contentions. We come to satisfaction aspect as mandated under section 14A(2) r.w. Rule 8D of the Income Tax Rules. There is no dispute that the Assessing Officer in his assessment order does not record the same so as to dispute assessee s books of accounts recording no expenditure incurred for exempt income. The CIT(A) upholds Assessing Officer s findings by observing that such a satisfaction need not be explicitly mentioned in assessment order as it can be deduced from the order itself. We find it to be not in tune with the specific provision in the act under section 14A(2). The legislature in its wisdom specifically envisages Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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