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PER MAHAVIR SINGH, VP: 1. This appeal by assessee is arising out of the order of Commissioner of Income Tax (Appeals)-14, Mumbai [for short ‘the ld. CIT(A)] in Appeal No. CIT(A)-14/IT-16/17-18 order dated 18.01.2019. The order giving appeal effect to the order of ITAT was passed by ACIT-8(1)(2), Mumbai under section 143(3) r.w.sec. 254 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for Assessment Year 2009-10 vide his order dated 05.01.2017.
The only issue in this appeal of assessee is against the order of CIT(A) retaining the disallowance under section 14A of the Act r.w.r. 8D(2)(iii) of the Income Tax Rules, 1962 (hereinafter ‘the Rules’), despite the fact that there was a clear direction by the Tribunal to consider the issue in No. 2375 Mum 2019-M/s Sajjan India Ltd. 5856/Mum/2012 order dated 23.04.2014. For this assessee has raised the following grounds:
1. Ld CIT(A) erred in retaining disallowance u/s.14A r.w.r.8D(2)(iii) at Rs. 50,05,026/- holding that appellant cannot be aggrieved as disallowance was offered in return of income and hence the issue was not raised before ITAT, as such no relief is allowable ignoring order as passed by Hon’ble ITAT in wherein Hon’ble ITAT directed to follow its directions as given for A.Y. 2007-08.
1.1 Hon’ble ITAT in A.Y. 2007-08 held that as investment activities are carried out at Head Office disallowance will be made after consideration of such expenses along with other directions.
3. Brief facts are that the assessee filed return of income on 29.09.2009 for the relevant Assessment Year 2009-10, along with this return assessee filed computation of income in which the expenses disallowed suo-moto under section 14A of the Act r.w.r. 8D(2)(iii) of the Rules at Rs. 55,05,020/-. The Assessing Officer (AO) accepted this suo-moto disallowance made by assessee under Rule 8D(2)(iii) in assessment order framed under section 143(3) dated 28.12.2011. The assessee has not raised any issue on this account before the CIT(A). However, the assessee before the CIT(A) raised issues on other additions. The matter was carry forward to the Tribunal and before the Tribunal the issue of suo-moto disallowance was raised in Assessment Year 2008-09 in for the first time and also raised in this very Assessment Year 2009-10 in ITA No. 5856/Mum/2012 and Tribunal vide order dated 23.04.2014 decide the issue for Assessment Year 2008-09 vide para-37 as under: Mum 2019-M/s Sajjan India Ltd.
After hearing both the parties, we find that this issue is also similar to the issue arising out of ground no.8 to 11 raised by the assessee in its appeal for the assessment 2007-08 cited above. In this year also, the matter is restored to the file of the Assessing Officer to examine the assessee's contention about the disallowance of interest as the assessee's case has been that investments have been made out of surplus funds and no borrowed funds have been utilized. If the assessee’s contention as per the working given is found acceptable, then no disallowance of interest expenses should be made. As regards the administrative- expenses, the same has to be seen with regard to the provisions of rule -8D(iii) and while taking average investments, those investments should be removed which are not capable of yielding exempt income. The Assessing Officer will decide this issue in the light of these observations and after giving due and effective opportunity of hearing to present its case. Thus, ground no.2 is partly allowed for statistical purposes.
Similarly for Assessment Year 2009-10 in the Tribunal on identical findings restored the matter back to the file of the AO vide para-40. The AO in the set-aside assessment proceedings or the appeal giving effect to the order of Tribunal passed an order under section 143(3) r.w.sec. 254 of the Act dated 05.01.2017, wherein the suo-moto disallowance of Rs. 50,05,020/- under Rule 8D(2)(iii) was affirmed by observing in para-7 as under:
7. Disallowance u/s.14A 7.1 As per para 1 of the order u/s. 143(3) of the Act dated 28.12.2011 Disallowance u/s.14A was made u/Rule 8D(2)(ii) amounting to Rs. 57,27,607/- as assessee has suomoto disallowed sum of Rs.50,05,020/- u/Rule 8D(2)(iii) in the return of income filed. In view of the ITAT decision, the disallowance u/s. 14A made u/Rule 8D amounting to Rs. 57,27,607/- is hereby deleted.
Aggrieved, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee contended that the Tribunal in Assessment Years 2007-08 to 3 Mum 2019-M/s Sajjan India Ltd. 2009-10 has set-aside the issue to the file of the AO to verify the head office expenses incurred, which are taken into cognizance, for making disallowance under Rule 8D(2)(iii) of the Rules. But CIT(A) has decided the issue in para-4 as under:
4. I have considered the submission made by the appellant. So far as the first and second grounds of appeal are concerned, I'm not in agreement with the submission of the appellant that the AO should have disturbed the suo moto disallowance of Rs. 50,05,026/- made by the appellant u/s 14A of the IT Act read with rule 8D(2)(iii) in its return of income while giving effect to the order of honourable ITAT. In the assessment order passed u/s 143(3) of the IT Act on 28/12/2011, the AO has accepted the disallowance of Rs. 50,05,026/- made by the appellant u/s 14A of the IT Act read with rule 8D(2)(iii) in its return of income. The AO has made only additional disallowance of Rs. 57,27,607/- u/s 14A of the IT Act read with rule 8D(2)(ii). When the AO had accepted the disallowance made by the appellant u/s 14A of the IT Act read with rule 8D(2)(iii), there is no question of the appellant being aggrieved by the order of the AO on this issue. Accordingly, this issue was not raised before the CIT(A). When the issue does not arise out of order of the CIT(A), the same could not have been raised by the appellant before the ITAT. Accordingly, it was not raised before the ITAT by the appellant. When issue of disallowance u/s 14A of the IT Act read with rule 8D(2)(iii) was not raised before, honourable ITAT, there is no question of honourable ITAT issuing a direction on this issue. Directions issued by the honourable Tribunal have to be read in conjunction with the grounds of appeal raised/ relief claimed before it. Therefore, action of the AO in retaining the suo moto disallowance of Rs. 50,05,026/-, made by the appellant u/s 14A of the IT Act read with rule 8D (2)(iii) in its return of income, while giving effect to the order of honourable ITAT is upheld and these grounds of appeal are dismissed.
6. Aggrieved, now assessee is in appeal before the Tribunal. We noted that the CIT(A) stated in his order as noted above, that the assessee has not raised the issue before the ITAT and once the issue has not been raised, there is no question of Tribunal issuing any direction on this issue. We further noted Mum 2019-M/s Sajjan India Ltd. from the order of Tribunal, as reproduced above that the specific ground was taken before the Tribunal i.e. Ground No.3 in ITA No. 5856/Mum/2012 which is reproduced by Tribunal and same reads as under:
The ld. Assessing Officer as well as CIT(A) should have appreciated that expense is disallowable u/r 8D(2)(iii) r.w. Section 14A of Income Tax Act without considering the fact that income arising on investments is liable to be taxed and hence) provisions of Section 14A are inapplicable.
We noted that the Tribunal has specifically set-aside this issue for Assessment Year 2008-09 vide para-40 as under:
After hearing both the parties, we find that this issue is similar to and ground no.8 to 11 raised by the assessee in the assessment year 2008-09 and in view of the findings given therein, this matter is restored back to the file of the Assessing Officer to decide the issue afresh as per the observations given in the said appeals after giving due and effective opportunity of hearing to present its case. Thus, ground no.1, 2 and 3 are allowed for statistical purposes.
From the above, it is clear that the Tribunal specifically set-aside the issue.
Similarly in Assessment Year 2009-10 also, the Tribunal set-aside this issue specifically as noted above in para-40 of the Tribunal dated 23.04.2014. We further noted from the argument of ld. counsel for the assessee and from the records. This issue has been considered by the Tribunal in Assessment Year 2011-12 in vide order dated 28.11.2017, wherein the issue was set-aside to the file of the AO for verification of facts and after that considering the disallowance.
In view of the above, we observed here that the CIT(A) i.e. First Appellate Authority has not gone into details and without reading the file passed the Mum 2019-M/s Sajjan India Ltd. order. Hence, once again we are restoring this issue back to the file of AO and AO will go into the details of head office expenses and then will decide the issue as per law.
In the result, appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 22nd January 2021.