TMI Blog2022 (1) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer was not accepting the said apportionment. In any event, the assessing officer will have to record its satisfaction to the said effect. AO has not recorded satisfaction and when this was pointed out before CIT(A) the same was not decided by the CIT(A), the issue was also not decided by the Tribunal when the assessee raised the same, though the grounds have been noted. The Tribunal has not rendered any decision on the said point but granted partial relief to the assessee with regard to the interest alone. See ASHISH JHUNJHUNWALA [ 2015 (12) TMI 905 - CALCUTTA HIGH COURT] and BRITANNIA INDUSTRIES LIMITED [ 2018 (9) TMI 152 - CALCUTTA HIGH COURT] See Godrej and Boyce Manufacturing Company Limited [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] wherein it was held that the law postulates the recording of satisfaction as the requirement to be complied with by the assessing officer. Thus the appeals are allowed and substantial questions of law are answered in favour of the assessee, and the matter stands remanded to the Tribunal to decide the aforementioned issue namely with regard to whether the assessing officer has recorded his satisfaction as required to be done under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of rule 8D of the Income Tax Rules, 1962 for computing the disallowance under Section 14A of the Income Tax Act, 1961 was justified? In ITAT/43/2021 the appellant has also raised identical substantial questions of law for consideration. Thus, we proceed to hear out and decide the aforesaid appeals by passing a common judgment and order. We have heard Mr. Khaitan, learned senior counsel assisted by Ms. Nilanjana Banerjee (Paul) counsel for the appellant and Mr. Debasish Chowdhury, learned senior standing counsel and Mr. Madhu Jana, learned junior standing counsel for the respondent/revenue. The issue involved in the instant case is whether rule 8D of the Income Tax Rules, 1962 could have been invoked by the Assessing Officer without examining the correctness of the assessee s claim of expenditure in relation to exempt income and without recording reasons as to why such a claim was not correct or acceptable. The subsidiary question would be whether the Assessing Officer can mechanically invoke and apply rule 8D of the Rules for computing the disallowance under Section 14A of the Act. For the assessment years 2008-09 and 2009-10 the Assessing Officer in paragraph 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s- DCIT reported in 328 ITR 081. Further, the assessee contended that the disallowance has been computed by automatically applying the method prescribed in rule 8D of the Rules without recording any reasons on the non-satisfaction of the claim of the appellant. We have perused the order passed by CIT(A) and we are surprised to note that no specific finding has been recorded by the CIT(A) on the ground canvassed by the assessee, the method of applying rule 8D and under what circumstances it could be done. The assessee filed appeal before the Tribunal as against the order of the CIT(A) for the assessment year 2008-09. Before the Tribunal the grounds which have been canvassed, before the CIT(A) were reiterated. However, we find that the Tribunal did not examine as to whether the Assessing Officer had mechanically followed the mechanism provided under rule 8D without recording any satisfaction. However, the Tribunal granted relief to the assessee with regard to the interest portion alone. As against the said portion of the order where relief was granted to the assessee, the Revenue is not on appeal before us. Since the order of the Tribunal was available when the appeal was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A . 41 Having regard to the language of section 14A(2) of the Act, read with rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the Assessing Officer needs to record satisfaction that having regard to the kind of the assessee, suo motu disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said appointment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the Assessing Officer . Two important issues have been pointed out in the aforementioned decision. Firstly that the provisions of Section 14A has to be interpreted, particularly, the words that in relation to the income that does not form part of total income. Therefore, it was held that the principle of apportionment of expenses comes into play as that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do the computation as directed to be done in paragraphs 11 and 12 of the order passed by the Tribunal dated 26th April, 2018 in ITAT/373/Kol/2013 etc. However, we make it clear that so far as the relief which was granted to the assessee with regard to the interest portion shall remain intact for all the three assessment years and the matter is remanded to the Tribunal to consider as to whether assessing officer had followed the mandate in Section 14A(2) of the Act and while doing so, the Tribunal shall take note of the decisions which we have referred to above which has laid down the procedure to be adopted by the assessing officer. For the above reasons, the appeals are allowed and substantial questions of law are answered in favour of the assessee, and the matter stands remanded to the Tribunal to decide the aforementioned issue namely with regard to whether the assessing officer has recorded his satisfaction as required to be done under Section 14A(2) before invoking the computation mode as specified in Rule 8D(2)(iii). As observed earlier, the relief granted to the assessee by the Tribunal for assessment years 2008-2009 and 2009-2010 by the CIT (A) for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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