DEEPAK PANDURANG GADRE,RATNAGIRI vs. ACIT, CENTRAL CIRCLE, KOLHAPUR, KOLHAPUR
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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI R.S. SYAL
PER R.S. SYAL, VP:
This appeal by the assessee arises out of the order dated
30-08-2023 passed by the ld. CIT(A) in National Faceless Appeal
Centre (NFAC), Delhi u/s.250 of the Income-tax Act, 1961
(hereinafter also called ‘the Act’) in relation to the assessment year
2017-18.
The only issue raised in this appeal is against the confirmation of
disallowance of Rs.17,52,720/- made by the Assessing Officer (AO)
u/s.14A of the Act.
2 ITA No. 1117/PUN/2023 Deepak Pandurang Gadre
Briefly stated, the facts of the case are that the assessee filed the
return declaring Nil income. During the course of assessment
proceedings, the AO observed that the assessee had made substantial
investment in shares of companies yielding exempt income but no
disallowance was offered u/s.14A of the Act. Not satisfied with the
assessee’s submissions, the AO made the disallowance amounting to
Rs.17,52,712/- under Rule 8D(2)(ii) at 1% of the annual average value
of investments. No succour was provided in the first appeal, against
which the assessee has approached the Tribunal.
I have heard the rival submissions and perused the relevant
material on record. The first contention advanced on behalf of the
assessee is that the AO did not record any satisfaction and hence
disallowance u/s.14A should be deleted. In this regard, it is observed
that the assessee did not offer any disallowance despite earning
exemption income from the shares and securities. The AO in para 4
had recorded satisfaction that the assessee made substantial
investment in shares of the company but did not offer any
disallowance.
Be that as it may, it is found as an admitted position that the
assessee did not offer any disallowance u/s 14A. The Hon'ble
Supreme Court in Maxopp Investment Vs. CIT (2018) 91 taxmann.com
154 (SC) has considered the aspect of recording of satisfaction by the
3 ITA No. 1117/PUN/2023 Deepak Pandurang Gadre
Assessing Officer for making disallowance u/s 14A and has laid down
in para 41 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.
It is palpable from the judgment of the Hon'ble Summit Court
that: “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.” It, therefore, becomes clear that only
where the assessee offers some disallowance u/s 14A with which the
Assessing Officer is not satisfied, then he needs to record a proper
satisfaction before proceeding to make disallowance u/s 14A. If, on
the other hand, the assessee does not offer any disallowance u/s 14A,
the requirement of recording satisfaction by the Assessing Officer will
be dispensed with. The facts of the instant case are covered by the
mandate in this case inasmuch as the assessee had not offered any
disallowance u/s 14A of the Act. In view of the fact that the
Assessing Officer properly recorded satisfaction u/s 14A of the Act,
4 ITA No. 1117/PUN/2023 Deepak Pandurang Gadre
despite there being no such requirement as laid down by the Hon'ble
Supreme Court in the case of Maxopp Investments Ltd., I am
convinced that the ld. AR’s contention on this aspect deserves not to
be accepted. Similar view has been taken by the Pune Tribunal in
several cases and the Delhi Tribunal in Excel Infotech Ltd. vs. DCIT
in ITA Nos.3492 to 3494/Del/2014 vide its order dated 25.4.2018. I
order accordingly.
Proceeding further, it is noted from the impugned order that the
assessee earned exempt income of Rs.40,750/- against which
disallowance u/s.14A read with Rule 8D has been made at
Rs.17,52,712/-. The Hon'ble Delhi High Court in Cheminvest Ltd. vs.
CIT (2015) 378 ITR 33 (Del) has held that if there is no exempt
income, there can be no question of making any disallowance u/s 14A
of the Act. Similar view has been taken by the Hon'ble Delhi High
Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC.
It is seen that an amendment has been carried out to section 14A
by the Finance Act, 2022 providing that the disallowance u/s 14A
would be called for notwithstanding no receipt of exempt income
during the year. The Hon’ble Delhi High Court in Pr.CIT Vs. Era
Infrastructure (India) Ltd. (2022) 448 ITR 674 (Delhi) has held such
amendment to be prospective. In that view of the matter, the case
5 ITA No. 1117/PUN/2023 Deepak Pandurang Gadre
pertaining to the A.Y. 2017-18 under consideration, the assessee
having earned tax free dividend of Rs.40,750/-, will be governed by
the ruling in Cheminvest (supra). Respectfully following the
precedent, I order to restrict the disallowance to Rs.40,750/-.
In the result, the appeal is partly allowed. Order pronounced in the Open Court on 07th November, 2023.
Sd/- (R.S.SYAL) VICE PRESIDENT
पुणे Pune; �दनांक Dated : 07th November, 2023 Satish
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to: 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. The Pr.CIT concerned िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, 4. SMC, Pune / DR, ITAT, Pune गाड� फाईल / Guard file 5.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
6 ITA No. 1117/PUN/2023 Deepak Pandurang Gadre
Date 1. Draft dictated on 07-11-2023 Sr.PS 2. Draft placed before author 07-11-2023 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *
