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TMI Blog2021 (8) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... onal requirement was not satisfied by Ld. AO in the present case and Ld.AO straightway proceeded to compute disallowance as per Rule 8D. The application of Rule 8D, in our considered opinion, was not mechanical or automatic. AO has mechanically applied the provisions of Rule 8D(2)(iii) while making the aforesaid disallowance without establishing any nexus of expenditure claimed by the assessee with that of exempt income earned during the year. In the absence of such recorded satisfaction, the additional disallowance as made in assessment order could not be sustained in the eyes of law. Accordingly, we are inclined to delete the additional disallowance as made by Ld. AO while computing income under normal provisions as well as while compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds of AY 2015-16 are that the assessee being resident corporate assessee is stated to be engaged in the business of leasing, finance, investment and advisory services. It earned exempt income of ₹ 155.75 Lacs and offered suo-moto disallowance u/s 14A for ₹ 6 Lacs. The same has been computed by apportioning salary expenditure, telephone, postage, electricity charges, STT, rent, demat charges as detailed in para 3.1.2 of the impugned order. 3.2 During assessment proceedings, the assessee submitted that, keeping in view assessee s computations, no further disallowance would be warranted. However, not convinced with assessee s explanation, Ld. AO computed additional disallowance of ₹ 38.99 Lacs u/r 8D(2)(iii) being 0.5% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Postage Telegram 1,05,658 15% 15,849 5. Electricity Charges 94,764 15% 14,215 6. Securities Transaction Charges 66,406 100% 66,406 7. Rent for Table space (notional) 90,000 100% 90,000 8. Demat Charges 9,541 15% 1,431 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed under Rule 8D 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 to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. Further Hon ble Apex Court in Maxopp Investment Limited V/s CIT (91 Taxmann.com 154) at para-32 observed that it is that expenditure alone which has been incurred in relation to the income which is not includible in tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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