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

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ITA 270/MUM/2018Status: DisposedITAT Mumbai11 December 2019AY 2013-1411 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO failed to record his dissatisfaction with the assessee's suo motu disallowance before invoking Rule 8D. Therefore, the disallowance made by invoking Rule 8D was not justified.

What were the facts?

The assessee offered a suo motu disallowance of Rs. 4,12,614 under Section 14A. The Assessing Officer (AO) invoked Rule 8D and made a higher disallowance. The CIT(A) confirmed the AO's action.

What were the issues?

Whether the AO properly recorded his dissatisfaction before invoking Rule 8D for disallowance under Section 14A, and whether the suo motu disallowance offered by the assessee was acceptable.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI PAWAN SINGH (JM) & SHRI S RIFAUR RAHMAN (AM) Shri Jayant R Pardiwala

For Appellant: Shri Ajay R Singh &

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.

13.

Now, turning the facts of the year under consideration, we have seen 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 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.

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