TMI Blog2020 (9) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... ipso facto enable the AO to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The AO must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the AO must be arrived at on an objective basis. It is only when the AO is not satisfied with the claim of the assessee, that the legislature directs him to follow the method that may be prescribed. Sub-s. (3) of s. 14A provides for the application of sub-s. (2) also to a situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the appellant / Revenue and Mr.R.Sivaraman, learned counsel for the respondent / assessee. The Tribunal considered the correctness of the order passed by the Commissioner of Income Tax (Appeals)-3, Chennai, dated 13.11.2017 by which the CIT (A) partly allowed the assessee's appeal and restricted the disallowance to the extent of exempt income by taking note of the earlier decision of the Chennai Bench of the Tribunal in Royala Corporation Limited in ITA.No.908/MDS/2015 and the Revenue challenging the said order before the Tribunal, which confirmed the order passed by the CIT(A), the correctness of which has been questioned in this appeal and therefore the substantial question of law to be decided in this appeal. 3. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Godrej Boyce Manufacturing Company Limited, Mumbai Vs. Deputy Commissioner of Income Tax, reported in (2010) 328 ITR 0081, has elaborated the procedure to be followed by the Assessing Officer under Section 14A in the following terms. The following principles would emerge from s. 14A : (a) the mandate of s. 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of the total income of the assessee; (b) sec. 14A(1) is enacted to ensure that only expenses incurred in respect of earning taxable income are allowed; (c) the principle of apportionment of expenses is widened by s. 14A to include even the apportionment of expenditure between taxable and non-taxable income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moreover, the satisfaction of the AO has to be arrived at, having regard to the accounts of the assessee. Hence, sub-s. (2) does not ipso facto enable the AO to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The AO must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the AO must be arrived at on an objective basis. It is only when the AO is not satisfied with the claim of the assessee, that the legislature di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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