MADHURI SUDHIR JOGLEKAR,PUNE vs. INCOME-TAX OFFICER, WARD - 11(1), PUNE

आदेश आदेश आदेश

PER SUSHMA CHOWLA, JM:

The appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals) – 1, Pune dated 28.09.2017 relating to assessment year 2013-14 against order passed u/s 143(3) of the Income Tax Act 1961 (in short ‘the Act’).

“1. The Learned CIT(A) did not give the sufficient opportunity of being heard to the appellant and completed the appellate proceedings.

provision of reasonable opportunity of hearing to the assessee by the Assessing Officer and the Commissioner of Income-tax (Appeals), against

which no arguments have been raised and even both the authorities below

have allowed reasonable opportunity to assessee and hence are dismissed.

Further, the assessee vide Grounds of appeal No.3 & 4 has raised the issue

against the disallowance made u/s.14A of the Act.

that in view of the provisions of section 14A of the Act read with Rule 8D, the disallowance of expenses on the investments made is to be disallowed.

Hence, the disallowance was made under Rule 8D(2)(iii) of the Act @ 0.5% of the average investments at Rs.24,585/-. The CIT(A) upheld the aforesaid

disallowance in the hands of the assessee.

that the Assessing Officer had failed to record any satisfaction before invoking

the provisions of section 14A of the Act. Admittedly, the assessee had not disallowed any part of the expenditure being relatable to the exempt income but section 14A(2) lays down that the AO shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act, if, the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure relatable to the exempt income. In other words, incase, the assessee on his own motion has disallowed part of the expenditure as being relatable to exempt income under the provisions of section 14 of the Act, then the Assessing Officer has to record satisfaction

before invoking the provisions of section 14A read with Rule 8D as to why the disallowance made by the assessee is not correct. Under section 14A(3) of the Act, it is provided that the provisions of sub-section (2) shall also apply, in relation to a case where the assessee claims that no expenditure has been incurred by him in relation to such exempt income. In other words, in case, the assessee does not make any suo motu disallowance of expenditure being

relatable to the exempt income, then also, the Assessing Officer has to record a satisfaction before invoking and or applying the provisions of section 14A of the Act. Such is the ratio laid down by the Hon’ble Apex Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2017) 394 ITR 449 (SC) which reads as under :

“37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable.”

of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (supra) and also the clear cut provisions of the Act, i.e. section 14A(3) of the Act, there is no merit in the disallowance made by the Assessing Officer without giving any show cause

notice to the assessee before invoking the provisions of section 14A of the Act.

Hence, the disallowance made by the Assessing Officer and confirmed by the CIT(A) is reversed. Grounds of appeal No.3 & 4 raised by the assessee are thus allowed.

for a total consideration of Rs.1,05,00,000/-. The land was purchased on 15-11-1988. The assessee computed the indexed cost of acquisition of the said land and against the capital gains so determined, claimed the benefit of deduction under section 54EC of the Act against the investment made of Rs.50,00,000/- in Capital Gain Bond Scheme. There is no dispute in respect of sale consideration and the cost of acquisition and the deduction claimed under section 54EC of the Act. Further, the assessee claimed the deduction under section 54B of the Act against two agricultural lands purchased at different

places. The first investment was made in an agricultural land situated at Village

Kusumali, Taluka Khanapur, Dist. Belgaum for Rs.21 lakhs and another

investment was made in an agricultural land situated at Village Bhadharwadi,

Taluka & Dist. Belgaum for Rs.29 lakhs. The Assessing Officer was of the view

that the assessee was entitled to claim the aforesaid deduction in respect of cost of one of agricultural land purchased and consequently he allowed the deduction on account of investment of Rs.29 lakhs made by assessee in the agricultural land. The plea of the assessee before the CIT(A) was that the word

singular represented plural and consequently, the assessee was entitled to claim the aforesaid deduction under section 54B of the Act in respect of both

the investments made in separate agricultural lands by the assessee. The CIT(A) did not allow the claim of the assessee and upheld the order of the Assessing Officer against which the assessee is in appeal.

stressed that though the word used is singular but the same has to be applied

in plural. In this regard, he made strong reliance on the Circular issued by the CBDT in respect of section 54 and 54F of the Act wherein it was clarified that the said deduction is available for making an investment in one residential

house. However, no such clarification was given in respect of section 54B of the Act. He stressed that the investment made by the assessee in two

separate agricultural lands purchased out of the sale proceeds of the land sold

by her need to be allowed in the hands of the assessee.

representatives, the issue raised vide Grounds of appeal No.5 & 6 is in respect

of claim of deduction under section 54B of the Act wherein admittedly, the assessee had sold agricultural land and had further made investment in two

separate agricultural lands. The assessee purchased two agricultural lands in different locations but both in District Belgaum and the question was whether

the assessee could claim the aforesaid benefit under section 54B of the Act,

wherein it talks about capital gains arising from transfer of capital asset, being a land which was being used by the assessee for agricultural purposes and if the assessee has within a period of two years, after that date, purchased ‘any other land’ for being used for agricultural purposes, then the assessee is entitled to the deduction as per the formula provided in (i) and (ii) of the sub-section. If the provisions of clauses (i) and (ii) are read, it talks about the amount of capital

gain which is greater than the cost of land so purchased, then the difference

between the amount of capital gain and cost of new asset is to be charged

under section 45 as ‘income of the previous year’ but in case, the capital gain is (P&H). In the facts of the said case, the assessee sold the land out of her

share in a piece of land but vide three registered separate sale deeds. The question which arose in that case was whether the land sold was agricultural

land or not and the Tribunal held in favour of the assessee which view of the Tribunal was upheld by the Hon’ble High Court. The assessee in that case had "याियक सद"य "याियक सद"य / JUDICIAL MEMBER "याियक "याियक सद"य सद"य

पुणे / Pune; "दनांक Dated : 28th December, 2018 Satish

आदेश आदेश क" आदेश आदेश क" क" "ितिलिप क" "ितिलिप "ितिलिप अ"ेिषत "ितिलिप अ"ेिषत अ"ेिषत/Copy of the Order is forwarded to : अ"ेिषत

अपीलाथ" / The Appellant;

आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार स"यािपत "ित ////

Senior Private Secretary, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune Date