JAYANT R. PARDIWALA,MUMBAI vs. ACIT 31(2), MUMBAI

per Rule 8D was not made as the formula was giving absurd results. It

was explained that the assessee was availing services of Fund

ITA 270/Mum/2018 Jayant R Pardiwala (AY 2013-14) Manager, who are getting hefty commission from mutual funds

because of huge investments made by assessee. As per assessee the suo moto disallowance was quite enough. The AO without expressly

recording his dis-satisfaction about the correctness of the suo moto

disallowance invoked the provisions of Rule 8D and in addition to

direct expenses of Rs. 2022/- under Rule 8D(2)(i) also disallowed Rs.

13,16,100/- under Rule 8D(2)(iii) being average value of investment. 12. To support the disallowance made by AO and confirmed by ld CIT(A),

the ld DR for the revenue strongly relied on the decision of Tribunal

for AY 2012-13 dated 30.01.2019. On the contrary the ld AR for the

assessee vehemently submitted that the facts for AY 2012-13 are at

variance as no suo moto disallowance under section 14A was offered

by the assessee in that year. We have carefully gone through the order

of the Tribunal dated 30.01.2019 of AY 2012-13 and find that no suo

moto disallowance under section 14A was offered by the assessee. The

coordinate bench after considering the submissions of the parties have

concluded that the question of recording of satisfaction would arise

only when the assessee made suo moto disallowance, since no suo

moto disallowance was made in relation to earning of exempt income,

then question of recording satisfaction under section 14(2) does not

ITA 270/Mum/2018 Jayant R Pardiwala (AY 2013-14) arise. Thus, in our considered view the facts for the year under

consideration are at variance.

that the assessee has suo moto offered 2% of the exempt income as

expenditure income for earning such income. Perusal of bifurcation of

exempt income shows that the assessee earned dividend of Rs.

54,74,290/-, Rs. 1.50,24,289/- being interest on tax free Public Sector

Units (PSU) bonds and Rs.1,32,123/- as a share of partnership firm.

We have noted that in appeal for AY 2009-10, the ld CIT(A) restricted

the disallowance of 14A @ 2% of the exempt income. Similar

disallowance under section 14A was again made in AY 2010-11, and

on appeal before Tribunal vide ITA No. 3033/Mum/2016, the

disallowances was restricted at 2% of the exempt income. 14. The Hon’ble Bombay High Court in CIT Vs M/s. Asian Paints Ltd,

(supra) by following the judgment of Hon’ble Apex Court in Godrej &

Boyce Mfg. Co. Ltd. (supra) held that in absence of recording the

aforesaid fact of non-satisfaction in terms of section 14(2) of the Act,

invocation of Rule 8 D is not permissible. Therefore, considering the

facts that in absence of recording non-satisfaction about the correctness

of assessee’s suo moto disallowances under section 14A, the further

ITA 270/Mum/2018 Jayant R Pardiwala (AY 2013-14) disallowance calculated by invoking the provisions of Rule 8D is not

justified. Hence, we direct the assessing officer to accept the

disallowance offered by the assessee. In the result the grounds of

appeal raised by the assessee are allowed. 15. In the result the appeal of the assessee is allowed.

Order pronounced in the open court on 11-12-2019.

Sd/- Sd/- (S Rifaur Rahman) (Pawan Singh) ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 11th December, 2019 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order Asstt. Registrar, ITAT, Mumbai