Applying rule 8D without considering correctness of claim of expenditure incurred in relation to exempt income is untenable

PCIT Vs Godrej & Boyce Mfg. Co. Ltd (Bombay High Court) Bombay High Court held that provision u/s 14(2) of the Income Tax Act does not empower the AO to apply Rule 8D straightaway without considering the correctness of the assessee’s claim in respect of expenditure incurred in relation to the exempt income. Facts- The case was selected for scrutiny and notice u/s 143(2) of the I.T. Act 1961 was issued to the assessee on 01.08.2012. The AO made various additions/disallowances – which includes disallowances u/s.14A r.w. Rule 8D amount to Rs.5,11,85,000/- The AO completed assessment vide ...