TMI Blog2021 (3) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... salary and administrative expenses. AO thereafter having regard to the accounts maintained by the assessee and the nature of expenses incurred was required to record his satisfaction that expenditure claimed by the assessee for earning of exempt income is incorrect or the expense disallowed by the assessee is not reasonable. It is only after recording of such satisfaction that Assessing Officer can proceed to make a disallowance under the prescribed method of Rule 8D and this is the mandate of Section 14A(2). In this case, the Assessing Officer has mechanically applied Rule 8D by stating that the expenditure incurred by the assessee towards exempt income, whether direct or indirect has to be disallowed in view of method provided under Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng ₹ 52,41,459/- on account accrued interest on advances to M/s. Nalwa Metal Alloys Limited, M/s. Gagan Trading Company Limited and M/s. JSW Steel Limited on the basis of the decision of his predecessor on identical issue in the assessee's own case by ignoring the fact that principle of res-judicata is not applicable to Income Tax proceedings as each assessment year is a separate year? 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in allowing appeal of the assessee by ignoring a fact that Section 145 of the Income Tax Act, 1961 (the Act) is mandatory for every assessee, permits use of one type of accounting system and does not permit hybrid accounting system in a particular year? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted that these investments were existing since 1985 and no borrowed funds were utilized for making such investments. Further, no one to one of correspondence can be arrived between income and the expenditure incurred for the purpose of Section 14A. However, ld. Assessing Officer held that expenditure incurred by the assessee towards exempt income whether direct income or indirect has to be disallowed in terms of Section 14A read with Rule 8D which has prescribed the method of determining the amount of expenditure to be disallowed u/s. 14A. Since there was no expenditure attributable to interest, Assessing Officer made disallowance of indirect expenses under Rule 8D (2)(iii) which worked out at ₹ 87,55,830/-; and after dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer, the assessee could not give the working in respect of suo motu disallowance, and therefore, it cannot be said that onus cast upon the assessee stands discharge and Assessing Officer then has no option but to compute the disallowance under the prescribed method provided in Rule 8D. Even the ld. CIT(A) has noted that assessee has failed to maintain separate account and the basis for proportionate disallowance. Accordingly, Assessing Officer was justified in making the disallowance under Rule 8D (2)(iii). 8. We have heard the rival contentions and also perused the relevant material placed on record. It is an admitted fact that assessee has earned dividend income on the investment which was made in much earlier years. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the nature of expenditure debited in the P L account, especially when the dividend has come from old investments and not fresh investment. Exactly on the same reasoning, this Tribunal in assessee's own case for all the earlier years right from Assessment Years 2005-06 to 2011-12 has deleted the disallowance made under Rule 8D(2)(iii). Thus, respectfully following the precedent in assessee's own case for the earlier years, we do not find any reason to sustain the disallowance which has been made by the Assessing Officer by mechanically applying Rule 8D. Accordingly, the appeal of the assessee is allowed. 9. In the result, the appeal of the assessee is allowed and Revenue's appeal is dismissed. Order pronounced in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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