{"id":6727,"date":"2013-05-06T15:51:36","date_gmt":"2013-05-06T10:21:36","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=6727"},"modified":"2013-05-06T15:51:36","modified_gmt":"2013-05-06T10:21:36","slug":"jk-investors-bombay-ltd-vs-acit-itat-mumbai-s-14a-rule-8d-cannot-be-invoked-without-showing-how-assessees-claim-is-wrong","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/jk-investors-bombay-ltd-vs-acit-itat-mumbai-s-14a-rule-8d-cannot-be-invoked-without-showing-how-assessees-claim-is-wrong\/","title":{"rendered":"JK Investors (Bombay) Ltd vs. ACIT (ITAT Mumbai)"},"content":{"rendered":"\n\n
Click here to download the judgement (JK_Investors_14A_Rule_8D.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nS. 14A: Rule 8D cannot be invoked without showing how assessee\u2019s claim is wrong
\n<\/strong><\/p>\n

In AY 2008-09, the assessee had PMS investments in shares of Rs. 202 crores and other investments on which it earned dividends of Rs. 8.14 crores. The assessee claimed that the dividends were received only on a few scrips and computed s. 14A disallowance by identifying specific expenditure at Rs. 1.55 crores. The AO, without showing how the assessee\u2019s method was wrong, invoked Rule 8D and made a disallowance of Rs. 2.39 crores. This was upheld by the CIT(A). On appeal by the assessee to the Tribunal, HELD reversing the AO & CIT(A):<\/p>\n

The condition precedent for the AO to invoke Rule 8D is that he first must examine the accounts of assessee and then record by giving cogent reasons why he is not satisfied with the correctness of the assessee\u2019s claim. In the absence of an examination of accounts and the recording of satisfaction, Rule 8D cannot be invoked. On facts, the assessee had itself disallowed interest, Demat charges and administrative expenses. The AO had not examined the accounts or given a finding how the assessee\u2019s computation was wrong. Consequently, the invocation of Rule 8D was improper and the disallowance was not permissible (Godrej & Boyce<\/a><\/strong> 328 ITR 81 (Bom), Maxopp Investment<\/a><\/strong> 247 CTR 162 (Del), Walfort Share<\/a><\/strong> 326 ITR 1 (SC), Hero Cycles<\/a><\/strong> 323 ITR 518 (P&H), Justice Sam P Bharucha<\/a><\/strong> & Pawan Kumar Parameshwar Lal<\/a><\/strong> followed)<\/p><\/blockquote>\n

\nFor more see S. 14A & Rule 8D: A comprehensive analysis<\/a><\/strong> by K. C. Singhal, Sr. VP, ITAT (Retd)\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The condition precedent for the AO to invoke Rule 8D is that he first must examine the accounts of assessee and then record by giving cogent reasons why he is not satisfied with the correctness of the assessee\u2019s claim. In the absence of an examination of accounts and the recording of satisfaction, Rule 8D cannot be invoked. On facts, the assessee had itself disallowed interest, Demat charges and administrative expenses. The AO had not examined the accounts or given a finding how the assessee\u2019s computation was wrong. Consequently, the invocation of Rule 8D was improper and the disallowance was not permissible (Godrej & Boyce<\/a><\/strong> 328 ITR 81 (Bom), Maxopp Investment<\/a><\/strong> 247 CTR 162 (Del), Walfort Share<\/a><\/strong> 326 ITR 1 (SC), Hero Cycles<\/a><\/strong> 323 ITR 518 (P&H), Justice Sam P Bharucha<\/a><\/strong> & Pawan Kumar Parameshwar Lal<\/a><\/strong> followed)<\/p>\n

Read more ›<\/a><\/div>\n

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