Issue before Court:
Whether CIT(A) was right in confirming the disallowance of Rs.39,40,500/- made by AO under Section 14A read with Rule 8D(2)(iii) of the Income Tax Rules without recording any satisfaction to the effect that the disallowance u/s 14A as computed by appellant was incorrect.
Brief Facts:
- Assessee-company provides custodial & depository services to institutional investors, mutual funds and retail investors. Assessee filed its ROI at Rs. 85,72,598/-. Assesee showed book profit of 82,71,41,992/- under section 115JB of the Act.
- During the year under consideration assessee earned dividend income of Rs. 7,81,80,792/-, which it claimed as exempt income under section 10(34) of the Act and claimed deduction of Rs.19,72,280/- under section 14A of the Act.
- AO without recording any satisfaction that disallowance u/s 14 A as computed by appellant was incorrect made addition of Rs. 39,40,500/-.
- On appeal CIT (A) confirmed the order passed by the AO without looking into the legal aspect the case.
Contention of the revenue:
- The claim of deduction under section 14A was not as per Rule 8D of the Income Tax Rules.
- where the assessee had not applied provisions of Rule 8D and in view of the ratio laid down by the Hon’ble Bombay High Court in the case of M/s. Godrej & Boyce Mfg. Co. Ltd. vs. DCIT reported in (2010) 328 ITR 81 (Bom.) provisions of Rule 8D are applicable from assessment year 2008-09 onwards. Therefore, the attributable expenditure for earning exempt income had to be computed as per the procedure mentioned in the said rules.
Contention of the assessee:
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