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TMI Blog2018 (11) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... applying Section 14A of the Act in the return filed had made disallowance of Rs. 1,04,90,253/-. This factual position is not disputed. 3. The Assessing Officer held that Rule 8D of the Income Tax Rules, 1962 ('Rules' for short) was mandatory and applying the Rule, the disallowance was increased to Rs. 4,15,24,709/-. The reasoning given by the Assessing Officer is as under:- "2. The brief facts of the case are that the assessee company is engaged in the business of generation and distribution of power. The company had taken a 27 MW Thermal Power Plant on Operating Lease w.e.f. March 2005 at Dalmiapuram, Distt. Tiruchirapalli and is operating the same. The assessee e-filed return of income declaring NIL income on 26/09/2011, which was proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) and (3) of section 14A, which are procedural. The disallowance is strictly to be made in terms of the specific provisions of Rule 8D. The assessee has offered the total dividend income as disallowance u/s 14A but it is not acceptable as computation under rule 8D. The assessee has not established with the necessary documentary evidence that it had not incurred any Interest expenditure for the investment which has yielded dividend or shall yield such income and any other expenditure for earning exempted Dividend Income. The assessee has incurred interest expenditure and other expenditure during the year as well as earlier years and the exact quantum of expenditure for the year as well as earlier years could not be worked out. The disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, having regard to the accounts placed before him. This is a necessary and mandatory precondition for the Assessing Officer to invoke and apply Rule 8D of the Rules. Thus, Rule 8D cannot be applied unless this satisfaction is recorded by the Assessing Officer. This is clear and lucid from the judgment of the Supreme Court in Godrej & Boyce Manufacturing Company Ltd. versus Deputy Commissioner of Income Tax, (2017) 394 ITR 449 in which it has been observed as under :- "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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