INCOME TAX RULE 8D INVOKING PERMISSIBLE ONLY WHEN AO RECORD SATISFACTION TO INCORRECTNESS OF ASSESSEE CLAIM

Kalyani Steels Ltd vs. ACIT (ITAT Pune)

February 6th, 2014

S. 14A & Rule 8D: If AO does not deal with assessee’s arguments, it means that he had not reached objective satisfaction that assessee’s method is incorrect & cannot invoke Rule 8D

The invoking of Rule 8D to compute the disallowance u/s 14A is neither automatic and nor is triggered merely because assessee has earned an exempt income. The invoking of rule 8D of the Rules is permissible only when the AO records the satisfaction in regard to the incorrectness of the claim of the assessee, having regard to the accounts of the assessee. This recording of satisfaction is a condition precedent in accordance with the law laid down in Godrej & Boyce Manufacturing Co328 ITR 81 (Bom) & Maxopp Investment Ltd 247 CTR 162 (Del)