TMI Blog2023 (3) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the factual position found that the assessing officer has not examined the accounts of the assessee and there is no satisfaction recorded by the assessing officer about the correctness of the claim of the assessee and without doing so, he has invoked Rule 8D(2)(ii) of the Income Tax Rules which is impermissible in law. Furthermore, the learned Tribunal had perused a chart which was produced by the assessee before the learned Tribunal setting out the financial position of the assessee. From the said chart the learned Tribunal found that the assessee had sufficient own funds which are several times more than the investments made by the assessee and, therefore, it can be concluded that the borrowed funds have not been utilised for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 32(1)(iia) of the Income Tax Act, 1961? We have heard Ms. Smita Das De, learned standing counsel appearing for the appellant/revenue and Mr. J.P. Khaitan, learned senior counsel assisted by Mr. Pratyush Jhunjhunwala and Ms. Swapna Das, learned advocates appearing for the respondent/assessee. So far as the substantial question of law (ii) is concerned, the same issue arose in the assessee s own case for the assessment year 2006-07 in ITA/19/2015 and by judgment dated 27th February, 2023 the appeal filed by the revenue is dismissed. Thus, following the said decision, the substantial question of law (ii) is answered against the revenue. With regard to the substantial question of law (i) is concerned, the learned Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) dismissed the appeal filed by the revenue. The operation portion of the judgment is as follows : 13. On going through the order passed by the Tribunal, we find that the explanation submitted by the assessee while framing the assessment proceeding was rejected by the assessing officer without adducing any reasons nor any defect was pointed out by the assessing officer at the time of assessment and straightway the assessing officer applied the machinery provision under Rule 8D of the Income ax Rules, 1962. Furthermore, on facts, the learned tribunal found that the assessee had sufficient funds and an inference can be drawn that the investment has been made out from the funds of the assessee. In the case of Kesoram Industries Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure was incurred) with regard to the expenditure incurred for earning income which is not chargeable to tax. Such a claim has to be examined by the Assessing Officer and only if an objective satisfaction is arrived at by the Assessing Officer that the claim made by the assessee cannot be accepted, the Assessing Officer can then proceed to apply computation mode as provided in rule 8D(2) of the Rules. 14. The decision of the Hon ble supreme Court in South Indian Bank Ltd. vs. Commissioner of Income Tax [2021] 438 ITR 1(SC) is also in aid of the case of the assessee as the tribunal has recorded specific finding that own funds were available with the assessee. The relevant paragraphs are quoted hereunder : 27. The aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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