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TMI Blog2018 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 (5) TMI 403 - SUPREME COURT OF INDIA] with regard to the applicability of Rule 8D. We have set out the relevant passage from the decision of the Tribunal on that point and do not find any error in the decision of the Tribunal which is under appeal. We do not think that any point of law is involved in this appeal as the same stands covered by the decision of the Hon’ble Supreme Court. The appeal and the stay petition are accordingly dismissed. AO has adopted one of the possible course open to him in law. The CIT cannot invoke jurisdiction u/s. 263 of the Act just because he does not agree with the view of the AO We are apprised by Mr. Murarka, learned counsel for the assessee-respondent that although his advocate-on-record has not filed v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had suo motu offered disallowance of Rs. 26, 06, 178/- on account of expenses incurred for earning exempt income. After that during the assessment the A. O. found that this was not correct and increase the disallowance to Rs. 36, 09, 734/-. A plain reading of Rule- 8D would show that once the A. O. was not satisfied with the correctness of the claim of expenditure in relation to exempt income then the disallowance has to be compulsorily computed as per the provisions of Rule-8D. This is mandatory. Further, the Malabar Industrial Company case (supra) of the Supreme Court will also not apply in this case as the only correct course open to the A. O. was computing disallowance as per provisions of Rule-8D which he has not done. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct, can the AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules. If the AO comes to the conclusion that claim made by the assessee 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue and therefore jurisdiction u/s. 263 of the Act ought not to have been invoked by the CIT. We therefore quash the order u/s. 263 of the Act and allow the appeal by the Assessee. " The question raised in this appeal is no more res integra and has been determined by the Supreme Court in the case of Godrej and Boyce Manufacturing Company Limited Vs. Deputy Commissioner of Income Tax, Mumbai and Another [ (2017) 7 SCC 421 ]. In that decision, the Supreme Court examined applicability of Rule 8D and held:- "37. We do not see how in the aforesaid fact situation a different view could have been taken for Assessment Year 2002-2003. Sub-sections(2) and (3) of Section 14-A of the Act read with Rule 8-D of the Rules merely prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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