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TMI Blog2016 (3) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, the AO noticed that the Assessee had on his own disallowed a sum of Rs. 26,07,177/- u/s. 14A of the Act, being expenditure incurred by the Assessee in earning income which does not form part of the total income under the Act. The AO called upon the Assessee to explain the basis on which the aforesaid sum was quantified by the Assessee. The Assessee gave details of the basis of its quantification as below: 3. The AO was of the view that the calculation given by the Assessee was reasonable. He however was of the view that the time devoted by the Treasure head towards monitoring of investments and maintaining accounting records thereof was on the lower side. He estimated that 40% of the treasury head time was to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Reference was made to the decision of ITAT Kolkata in the case of Balarampur Chini Mills Ltd. Vs. DCIT ITA No. 504/Kol/11 dated 29.7.2011 for AY 2008-09. 4.2. The CIT however held that if the AO was not satisfied with the method of disallowance u/s. 14A of the Act as done by the Assessee he has no other option but to resort to make disallowance in accordance with Rule 8D of the Rules. He set aside the order of the AO and directed the AO to compute disallowance u/s. 14A of the Act by applying Rule 8D of the Rules. 5. Aggrieved by the order of the CIT the Assessee is in appeal before the Tribunal. 6. We have heard the submissions of the learned counsel for the Assessee who reiterated submissions as were made before CIT and fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not correct, it is only thereafter that the AO can proceed to make the disallowance in terms of Rule 8D of the Rules. Even in a case where the AO rejects the claim of the assessee that no expenses were incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis. By applying the Rule 8D of the Rules blindly sometimes absurd disallowances would result. In our view, therefore while examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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