Case Law Details
PCIT Vs Century Enka Limited (Calcutta High Court)
Calcutta High Court held that invocation of provisions of rule 8D(2)(ii) of the Income Tax Rules by AO without examining the accounts of the assessee and without examining the claim made by the assessee is unjustified.
Facts- The present appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 is directed against the order passed by the Income Tax Appellate Tribunal, Kolkata Bench for the assessment year 2008-09.
Notably, the Tribunal after taking note of the factual position found that AO has not examined the accounts of the assessee and there is no satisfaction recorded by the assessing officer about the correctness of the claim of the assessee and without doing so, he has invoked Rule 8D(2)(ii) of the Income Tax Rules which is impermissible in law. Furthermore, the Tribunal had perused a chart which was produced by the assessee before the learned Tribunal setting out the financial position of the assessee. From the said chart the Tribunal found that the assessee had sufficient own funds which are several times more than the investments made by the assessee and, therefore, it can be concluded that the borrowed funds have not been utilised for the purpose of making investments.
Conclusion- In Pr. CIT v. Britannia Industries Limited it was pointed out that the assessee has to make a claim (including a claim that no expenditure was incurred) with regard to the expenditure incurred for earning income which is not chargeable to tax. Such a claim has to be examined by the Assessing Officer and only if an objective satisfaction is arrived at by the Assessing Officer that the claim made by the assessee cannot be accepted, the Assessing Officer can then proceed to apply computation mode as provided in rule 8D(2) of the Rules.
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