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TMI Blog2019 (1) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... r records his satisfaction and rejects the explanation of the assessee regarding the disallowance of expenditure. In the present case the assessment order proceeds on a wrong assumption that Rule 8D would applies to all cases and is mandatory. Finding of the Tribunal affirming the order of the Commissioner of Income Tax (Appeals) is in accordance with the law. Legal principle and ratio is no longer res integra and is settled by the judgment of the Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. Deputy Commissioner of Income-Tax and another [2017 (5) TMI 403 - SUPREME COURT OF INDIA] determination is to be made on application of the formula prescribed under Rule 8-D or in the best judgment of the assessing officer, what the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and admitted position that the respondent assessee had earned dividend income of ₹ 8.97 crores which was exempted under Section 10(34) of the Act. The said dividend was paid by group companies. The assessee had made self disallowance of ₹ 9,07,453/-. 3. The assessing officer, without examining and referring to the disallowance or recording his dissatisfaction on disallowance made, had invoked and applied Rule 8D of the Income Tax rules, 1962( Rules , for short) as if it was mandatory. This is clear from the relevant portion of the assessment order under the heading expenditure incurred in relation to income not includible in total income under section 14A read with Rule 8D, which for the sake of completeness and clarity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,453/- (ii) Interest Expenditure to the extent not directly attributable to any particular Income(A) Rs.12,26,00,000 Average Value of Investment (B) Average value of investment in exempted income as Per the balance sheet as on 01.04.2009 and 31.03.2010 Investment in exempted income as on 01.04.2009 Rs.72,91.40.000/- Investment in exempted income as on 31.03.2010 Rs.107,03,70,000/- Total Rs.179,95,10,000/- Average Value of Investment (B) Average Value of Total Assests(C) Value of total assets as On 01.04.2009 ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out mechanically without considering the submissions or referring to the accounts of the assessee. I have examined the annual report of the appellant and it is seen that As on 31st March, 2010 the appellant had the total investment in assets giving rise to tax free income at ₹ 107.03 crores and against that the appellant had own funds of ₹ 22.50 crores as share capital and ₹ 493.41 crores as reserves and surplus. Thus own funds/interest free funds amounting to ₹ 515.91 crores are much more as compared to investments of ₹ 107.03 crores yielding tax free income. Further during the current year the investments have increased from ₹ 72.91 crores as on 31.03.2009 to ₹ 107.03 crores as 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 9,07,453/- was sufficient and in accordance with law. The final finding recorded by the Commissioner of the Income-Tax (Appeals) was: Thus respectfully relying of the above referred decision of Hon ble ITAT, it is held that the rejection of appellant s claim by A.O. u/s 14A is not as per law as no satisfaction is recorded for invoking Rule 8D and the rejection of appellant s claim is not supported by material evidence that expenses debited to the accounts of the appellant have proximate connection with the earning of the exempt income. Therefore, the disallowance of expenses under Rule 8D(2) is not in accordance with law and is liable to be deleted. 7. The Tribunal adopts and accepts the reasoning given by first appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) in which it has been held as under:- 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 a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the assessing officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8-D or in the best judgment of the assessing officer, what the law postulates is the requirement of a satisfaction in the assessing officer that having regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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