JSW HOLDINGS LTD.,MUMBAI vs. DCIT 5(2)(1), MUMBAI

These are two appeals of the same assessee for A.Ys. 2010-11 & 2013-14 involving similar issues of disallowance u/s 14 A of the Act, therefore, disposed of by this common order.

A.Y. 2010-11 is filed by assessee against appellate order passed by the learned Commissioner of Income-tax (Appeals)-10, Mumbai [the “1. The learned CIT (Appeals) was not justified in confirming the disallowance of Rs.1,24,87,000/- u/s 14A of the Act. The reasons given by him in this regard are incorrect and unjustified.

The appellant craves leave to add to, to alter or to amend the above Grounds of Appeal

The learned Assessing Officer found that assessee has earned dividend income of ₹2,06,63,690/- and has Suo moto disallowed ₹35,37,388/-. Assessee was asked that why disallowance should not be worked out according to Rule 8D of the Income Tax Rules, 1962 (the Rules).

Assessee submitted calculation of disallowance of ₹35,37,388/- and submitted that it is proper. Assessee

For this year, the learned Assessing Officer held that principle of res-judicata does not apply, and worked out disallowance under Rule 8D. However, as the disallowance under Rule 8D was exceeding total expenditure debited in the profit and loss account of ₹1,24,87,000/-, he restricted the disallowance to ₹1,24,87,000/-, reduced Suo moto disallowance and made balance disallowance of ₹89,49,612/-. The assessment order under Section 143(3) of the Act was passed on 12th February, 2013.

Matter travelled to the ITAT as the learned CIT (A) confirmed the above disallowance. Coordinate Bench vide order dated 29th June, 2015 vide paragraph no.6, set aside the matter back to the file of the learned Assessing Officer directing the learned Assessing Officer to consider the explanation of assessee with respect to strategic investment. Consequent to that, the learned Assessing Officer reiterated the disallowance originally made by order dated21/11/2016 passed u/s 143 (3) read with

On appeal before us, the learned Authorized Representative submitted that the Provision of Section 14A of the Act clearly lays down that before proposing to invoke Rule 8D of the Rules, the learned Assessing Officer should record the satisfaction about the correctness of claim of the assessee. Unless there is a satisfaction recorded by the learned Assessing Officer on verification of the claim, the disallowance under Rule 8D cannot be made. For this proposition, he referred to the provisions of Section 14A of the Act and submitted that the assessment order passed under Section 143(3) of the Act on 12th February 2013 does not show any satisfaction recorded. With respect to the finding of the learned CIT (A), he submitted that the satisfaction has to be of the Assessing

The learned Departmental Representative supported the order of the learned CIT (A) and submitted that the powers of the learned CIT (A) are co-terminus with the powers of the learned Assessing Officer and therefore the recording of satisfaction of the learned CIT (A) is valid.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that the assessing officer recorded that assessee has earned dividend income of ₹ 20,663,690/– and assessee has disallowed only its own a sum of Rs. 35,37,388 on account of Section 14 A. There from straightway assessing officer jumped to the conclusion that why the disallowance should not be made u/s 14 A and is required to be worked out as per rule 8D of the income tax rules. We find that before invoking the provisions of rule 8D of the income tax rules for working out disallowance u/s 14 A, there is a mandatory requirement of recording of the satisfaction about the correctness of the claim of the assessee by the learned assessing officer on examination of accounts of the assessee. We find that there is no such satisfaction recorded by the learned assessing officer. This is also confirmed when the learned CIT – A, proceeded himself to record such satisfaction. The law mandates that such satisfaction is required to be recorded by the learned

As disallowance is deleted, ground number 2 of the appeal does not survive, hence, dismissed.

In the result appeal of the assessee for assessment year 2010 – 11 is partly allowed.

Now we come to the appeal of the assessee for assessment year 2012 – 13 in ITA number 2535/M/2019

Against the above assessment order assessee preferred an appeal before the learned CIT – A, the appellate order was passed on 25/1/2019 wherein he relied upon the appellate order passed by him for assessment year 2000 – 11 in case of the assessee.. With respect to the disallowance made in the normal computation of the total income, he confirmed the same, whereas, disallowance in computation of the book profit was deleted. Assessee aggrieved with that appellate order is in appeal before us.

The learned authorized representative challenged the same on the issue of satisfaction as well as the amount of disallowance.

The learned departmental representative vehemently supported the orders of the lower authorities.

The learned authorized representative has vehemently supported the decision of coordinate bench in case of Bajaj Holdings and investment Ltd vs deputy Commissioner of income tax, reported in 62 CCH 125 (2021), wherein it has been held that it would be just and fair to identify the specific expenditure that had been attributed for the

In the result, appeal for assessment year 2010 – 11 and appeal for assessment year 2013 – 14 is partly allowed.