M/S. SYNTHOLAB CHEMICALS & RESEARCH,MUMBAI vs. DCIT-19(3), MUMBAI

The brief facts of the case are that the assessee is a partnership firm engaged in the business of manufacturing bulk drugs and intermediaries. For the Assessment Year 2013-14, the assessee filed its return of income declaring total income of Rs. 1,56,90,720/-.

During the course of scrutiny assessment proceedings, the Assessing Officer (AO) noted that the assessee had earned exempt dividend income of Rs. 14,82,601/- under Section 10(34) of the Act and exempt long-term capital gains of Rs. 21,76,163/- under Section 10(38) of the Act. Since the assessee had not made any disallowance under Section 14A of the Act, the AO invoked Rule 8D of the Income-tax Rules, 1962 and computed disallowance of Rs. 54,81,521/- under Rule 8D(2)(ii) towards interest and Rs. 2,69,558/- under Rule 8D(2)(iii) towards administrative expenses.

In the first appeal, the learned CIT(A) restricted the total disallowance under Section 14A of the Act to the extent of exempt income earned, i.e. Rs. 36,58,764/-, and deleted the remaining amount. Aggrieved by the sustenance of the disallowance, the assessee is in appeal before us.

Before us, the learned Authorized Representative (AR) for the assessee submitted that the issue relating to disallowance of interest paid to partners under Section 14A read with Rule 8D(2)(ii) is covered in favour of the assessee by the decisions of the Coordinate Benches of the Tribunal in the assessee's own case for Assessment Year 2012-13 (in ITA No. 2000/PN/2014 and connected appeals) and Assessment Year 2014-15 (order dated 18th March, 2026). It was further submitted that the learned CIT(A) failed to consider the aforesaid decisions as well as the detailed written submissions and documentary evidence placed on record by the assessee, forming part of the Paper Book at pages 16 to 69. In view of the above, the learned AR prayed that the matter may be restored to the file of the Assessing Officer for fresh verification and adjudication.

The learned Departmental Representative (DR), on the other hand, relied upon the orders of the lower authorities. However, he did not object to restoring the matter to the file of the AO for proper verification of the judicial precedents and factual submissions.

We have heard both the parties and perused the material available on record. It is observed that the assessee has submitted that the decisions of the Coordinate Benches of the Tribunal in its own case for A.Y. 2012-13 and A.Y. 2014-15, relating to the issue of disallowance of interest paid to partners under Section 14A of the Act, as well as the specific factual contentions and documentary evidence forming part of the Paper Book at pages 16 to 69, were not duly considered.

The principles of judicial discipline require that the decisions of Coordinate Benches in the assessee's own case, along with the relevant factual submissions and documents placed on record, be duly considered. In the absence of proper verification and consideration of the aforesaid aspects, we deem it just and appropriate to set aside the impugned order and restore the matter to the file of the Assessing Officer for fresh adjudication.

The Assessing Officer is directed to re-adjudicate the issue afresh in accordance with law, after taking into consideration the decisions of the Coordinate Benches of the ITAT in the assessee's own case for A.Y. 2012- 13 and A.Y. 2014-15, as well as the written submissions and documents placed at pages 16 to 69 of the Paper Book.

Needless to say, the AO shall afford reasonable opportunity of being heard to the assessee before passing the order.

Before parting, we make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on the merits of the dispute which shall be adjudicated by AO independently in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes.