THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. CIMS HOSPITAL PVT. LTD.

TAXAP/101/2020HC GujaratGJHC24005446202025 February 2020Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE BHARGAV D. KARIA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal's finding that the Assessing Officer (AO) did not record any satisfaction under Section 14A(2) of the Income Tax Act, 1961, prior to invoking Rule 8D, was a finding of fact. Consequently, the AO could not have made any disallowance by applying Rule 8D. Therefore, the first proposed substantial question of law (Question 2(A)) did not arise from the impugned order. As the disallowance under Section 14A was deleted, the issue of adding this disallowance to the book profit under Section 115JB (Question 2(B)) also did not arise. The Court agreed with the Tribunal's finding. The ratio decidendi is that the AO must record satisfaction as per Section 14A(2) before invoking Rule 8D for disallowance, and failure to do so renders the disallowance invalid. The appeal was dismissed.

What were the facts?

The Revenue has filed this Tax Appeal against an order of the Income Tax Appellate Tribunal (Tribunal) for Assessment Year 2012-13. The Assessing Officer (AO) disallowed Rs. 35,825 under Section 14A read with Rule 8D, considering the assessee's disallowance of Rs. 5,500 to be incorrect and calculating the disallowance at Rs. 41,325. The Commissioner of Income Tax (Appeals) rejected the assessee's appeal on this point. The assessee then appealed to the Tribunal, which deleted the disallowance made by the AO. The Tribunal found that the AO had not recorded the necessary satisfaction under Section 14A(2) to invoke Rule 8D.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and facts in deleting the disallowance of Rs. 35,825 made under Section 14A read with Rule 8D of the Income Tax Rules, 1962? (Question of law and fact, concerning Section 14A and Rule 8D) 2. Whether the Appellate Tribunal has erred in law and facts in deleting the addition of disallowance made under Section 14A to the book profit under Section 115JB of the Income Tax Act, 1961? (Question of law and fact, concerning Section 14A and Section 115JB) Assessee's Contention: The Tribunal held that the Assessing Officer failed to record the requisite satisfaction under Section 14A(2) before invoking Rule 8D for computing the disallowance. The assessee relied on the Tribunal's finding that the AO did not record satisfaction. The judgment does not explicitly record arguments made by the assessee before the High Court, but it refers to the Tribunal's finding which was in favour of the assessee. Revenue's Contention: The Revenue argued that the Appellate Tribunal erred in deleting the disallowance made under Section 14A read with Rule 8D and consequently erred in not allowing the addition of such disallowance to the book profit under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB,Section 260A

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Cause title — parties, addresses and appearances
C/TAXAP/101/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 101 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus CIMS HOSPITAL PVT. LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 25/02/2020

ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1.

This Tax Appeal is filed under Section 260A of the Income Tax Act­1961 (for short the “Act­1961”) at the instance of revenue and is directed against the order dated 05.09.2019, passed by the Income Tax Appellate   Tribunal,   Ahmedabad   Bench   'B',   Ahmedabad (for short

the “Tribunal”)in the ITA No.3213/Ahd/2016 for the Assessment Year 2012­13. 2. The   Revenue   has   proposed   the   following   two questions as substantial questions of law:­ “2(A) Whether

The order continues below.

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