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Income Tax Appellate Tribunal, J BENCH, MUMBAI
Per contra, the Ld. Departmental Representative relied upon 18. the order passed by the Assessing Officer. He submitted that the Assessing Officer has rightly invoked provisions of rule 8D to make disallowance of INR 9,00,000/- in terms of Rule 8D(2)(iii) of the Rules as the Appellant had made no disallowance under Section 14A of the Act despite earning exempt income.
We have considered the rival submissions and perused the 19. material on record. We find merit in the contention of the Appellant with the Assessing Officer has failed the record satisfaction before invoking provisions of Section 14A of the Act read with Rule 8D of the Rules. On perusal of the assessment order we find that the Assessing Officer has rejected the contention of the Assessee that no disallowance should be made under Section 14A of the Act and while doing so, the Assessing Officer has neither referred to any interest cost and/or administrative expenses incurred/claimed by the Assessee for earning the exempt income, nor made any reference to the accounts of the Assessee.
The Hon'ble Supreme Court in the case of Godrej & Boyce Mfg. 20. Co. Ltd. v. Dy. CIT: 394 ITR 449 had observed that it was only
Assessment Year: 2009-10 after the Assessing Officer had recorded his dissatisfaction as regards the correctness of the claim of the Assessee that the provisions of Section 14A of the Act read with Rule 8D could be invoked. It relevant observations of the Hon’ble Supreme Court are as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." (Emphasis Supplied) Similar view was taken by the Hon'ble Supreme Court in case 21. of Maxopp Investment Ltd. vs. CIT 347 ITR 272 wherein it was held as under: "41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO." (Emphasis Supplied) Thus, it is settled legal position that before proceeding to 22. invoke provisions of Rule 8D of the Rules for computing 11
Assessment Year: 2009-10 disallowance under Section 14A of the Act the Assessing Officer must express his dissatisfaction regarding the computation of disallowance made by the Assessee. Accordingly, in view of the above judgments, the addition of INR 9,00,000/- made under Section 14A of the Act read with Rule 8D(2)(iii) of the Rules is deleted. Ground No. 3 raised by the Appellant is allowed.
Ground No. 4 23. Ground No. 4 raised by the Appellant pertains to disallowance of depreciation of INR 10,42,446/-.
The relevant facts in brief are that from the Previous Year 24. 2006-07 relevant to the Assessment Year 2007-08 the Appellant had claimed depreciation of INR 1,01,13,325/-, on routers, connection charges and servers as the Appellant was of the view that the same qualify for depreciation at the rate of 60%, being the rate applicable to computers. However, the Assessing Officer restricted the depreciation to 15%.
During the relevant previous year, the Appellant again claimed 25. depreciation of INR 13,89,928/- computed at the rate of 60% on the opening Written Down Value (WDV) as no additions were made to the block of assets during the relevant previous year. However, the Assessing Officer again restricted the claim of depreciation to 15% and made a disallowance of INR 10,42,446/- out of the total depreciation of INR 13,89,928/- claimed by the Appellant.
We find that this issue stands decided in favour of the 26. Appellant by the Tribunal in appeal preferred by the Appellant for the Assessment Year 2007-08 [ITA No. 7069/Mum/2016] 12 Assessment Year: 2009-10 vide order dated 29/01/2020. The relevant extract of the decision of the Tribunal read as under: “27. We have considered the submission of both the parties and perused the record. The Assessing Officer while passing the assessment order allowed depreciation @ 15% against the claim of assessee of 60%. The ld. CIT(A) confirmed the action of Assessing Officer.
We have noted that Hon’ble Delhi High Court in DCIT vs. BSES Rajdhani Powers Ltd. (supra) and in CIT vs. Bonanza Portfolio Ltd. (supra) held that computer peripherals and accessories form an integral part of computer system and eligible for depreciation @ 60%. Considering the decision of Tribunal, the Hon’ble Delhi High Court is directed the Assessing Officer to allow the depreciation @ 60% on printers, cable lines and other connected peripherals. Hence, this ground of appeal is allowed.” (Emphasis Supplied)
In view of the above, the Appellant is entitled to claim 27. depreciation at the rate of 60%. Accordingly, disallowance of depreciation of INR 10,42,446/- stands deleted. Ground No. 4 raised by the Appellant is allowed.
In result, the present appeal filed by the Assessee is partly 28. allowed.
Order pronounced on 23.06.2023.