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Income Tax Appellate Tribunal, DELHI BENCH “B”, NEW DELHI
Before: SH. N.K.SAINI & Ms. SUCHITRA KAMBLE
PER SUCHITRA KAMBLE , JUDICIAL MEMBER : This appeal is filed by the assessee against order dated 16/03/2015 passed by the CIT (A)-I, Gurgaon for the Assessment Year 2008-09.
The grounds of appeal are as follows :
(Cairn India Ltd.) “1. That the Ld. Commissioner of Income Tax (Appeals)-I, Gurgaon [‘Ld. CIT(A)’] erred on the facts and circumstances of the case & in law in confirming an addition of Rs. 2,36,57,592/- on account of notional expenditure incurred to earn the exempt income by invoking Section 14A of the Income Tax Act, 1961 (‘the Act’) read with Rule 8D of the Income Tax Rules, 1962 (‘the Rules’).
1.1 That the Ld. CIT(A) erred in confirming the action of the Ld. AO in making an addition under section 14A of the Act without considering the Appellant’s working of actual apportioned cost amounting to Rs. 176,469, which in any case is substantially lower than the amount of Rs. 12,00,000/-, which Appellant suo moto disallowd in its return of income.
1.2 That the Ld. CIT(A) erred in confirming the addition under section 14A of the Act without appreciating the provisions of section 14A(2) of the Act which provides that the addition can be made only if an assessing officer having regard to the account of the assessee is not satisfied with the correctness of the claim of an assessee.
1.3 Without prejudice to the contention of the Appellant that no disallowance is warranted under section 14A of the Act, the CIT(A) erred in not disposing off alternative ground of appeal no. 2.2 raised before him in context of mistake in amount of investments taken and omission of averaging of investments as contemplated under the Rule 8D of the Rules.”
(Cairn India Ltd.) 3. Cairn India Ltd. (“CIL”) is a company incorporated in India under companies Act, 1956 having it registered office at 101. West View, Vear Sawarkar Marg, Prabhadevi, Mumbai, Maharastra – 400025. The corporate office of the CIL is situated at 3rd & 4th Floor, Vipul Plaza, Suncity, Gurgaon, Haryana- 122002. CIL was incorporated on August 21, 2006 and is a subsidiary of Cain UK Holdings Ltd., which in turn is a wholly owned subsidiary of Cairn Energy Plc, UK which is listed on London Stock Exchange. CIL is listed on the Bombay Stock Exchange Ltd., and National Stock Exchange of India Ltd., CIL is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refilling, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in mineral oil, petroleum, gas and related by products and other activities incidental to above. The Assessee e- filed its return declaring loss of Rs. 1221375868/- on 29.09.2008. The case of the assessee was called for scrutiny. Notice under section 143(2) was issued on 17.09.2009 for 07.10.2009 and duly served. Further, notices u/s 143(2) / 115WE(2) was issued on 12.07.2010 for 19.07.2010 and duly served upon the assessee. The case was represented by Assistant Manager of assessee, he has filed the required particulars as per questionnaire and order-sheet. The books of account were produced and test checked by the Assessing Officer. The Assessing Officer observed that from the audited balance sheet and profit and loss account of the year, it was noticed that the assessee invested a sum of Rs. 497,1,518,455/- (value of (Cairn India Ltd.) investment as on 31.03.2008). The investments were made out of the proceeds of initial Public Offer (IPO) made by the assessee during the F.Y. 2006-07. The Assessing Officer observed that during the year, the assessee earned an amount of Rs. 15,98,73,039/- assessee as dividend income. During the assessment proceedings, the assessee was asked to furnish the details of expenditure earned for earning dividends income vide order sheet entry dated 14.12.2011. In response to this, assessee filed its reply vide letter dated 22.12.2011 wherein the assessee submitted that expenditure of Rs. 12,00,000/- was claimed on the basis of the Quote dated 04.09.2008 received from J.M.financial grievance Pvt. Ltd. The Assessing Officer observed that the assessee claimed the expenditure on the basis of quotation and not on any materialized contract. Also assessee could not provide details of actual expenditure made for earning the dividend income. Hence, the basis of the expenditure claimed by the assessed was not accepted by the Assessing Officer and the expenses incurred for earning the exempt income were calculated as per the Procedure given under Rule 8D of the Act read with section 14A the Income Tax Act, 1961. The calculation of the expenditure for earning the dividend income was calculated by the Assessing Officer as under :- As per Rule 8D (2)(iii) of = .5/100 X 4971518445/- = 2,48,57,592/- the Income Tax Rules, 1961 Less : already disallowed by the assessee : 12,00,000/- Total : Rs. 23657592/-
(Cairn India Ltd.) Hence an amount of Rs. 23657592/- was added by the Assessing Officer as the expenditure incurred by the assessee to earn exempt income.
Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the issue relating to Sec. 14A r.w. Rule 8D is covered against assessee by Tribunal decision in assessee’s own case for A.Y. 2011-12 being order dated 09.10.2017 except issue relating to Ground No. 1.3 wherein the assessee filed Section 154 rectification application in context of mistake in amount of investments taken and omission of averaging of investments as contemplated under Rule 8D. The Ld. AR submitted that in earlier year there was no dispute in computation, but in the present assessment year the rectification application u/s 154 for mistake in amount of investment was made by assessee. Therefore, the Ld. AR submitted that limited to correct computation of investment the matter may be remanded back to the file of Assessing Officer in respect of Ground No. 1.3.
The Ld. DR did not oppose the contention raised by the Ld. AR in respect of Ground No. 1.3.
(Cairn India Ltd.) 7. We have heard both the parties and perused all the material available on record. The Tribunal for A.Y. 2011-12 held as under : “6. It is thus discernible from page 6 of the assessment order that the Assessing Officer recorded proper satisfaction with regard to the assessee’s computation of disallowance and only thereafter moved to compute disallowance u/s 14A of the Act in terms of rule 8D of the Income-tax Rules, 1962. In our considered opinion, the Assessing Officer did record proper satisfaction in terms of section 14(2) of the Act before resorting to rule 8D. This contention of the assessee, therefore, fails.” ……………..
Adverting to the facts of the instant case, we find that the Assessing Officer, on being dissatisfied with the assessee’s computation of disallowance, embarked on his own computation under rule 8D(2)(iii) at Rs. 5,89,98,005/-. The assessee has not disputed any part of the calculation of such disallowance. This computation of disallowance, having been made in terms of rule 8D(2)(iii), is held to have rightly made. The assessment order making disallowance of Rs. 5.89 crore u/s 14A under the normal provisions of the Act is upheld pro tanto.”
Therefore as relates to Ground Nos. 1, 1.1 and 1.2 are concerned the same are covered against assessee by the decision of the Tribunal in assessee’s own case. Hence, Ground Nos. 1, 1.1, & 1.2 are dismissed. As relates to Ground No. 1.3, there is a dispute of computation raised by assessee by filing rectification application which yet have to be decided. Therefore, we are remanding back this issue to the file of the Assessing Officer and directing the Assessing Officer to decide the rectification application filed by the assessee u/s. 154 within the reasonable time. Needless to say the assessee be given opportunity of hearing by followings principles of natural justice. Ground No. 1.3 is partly allowed for statistical purpose.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 23rd August, 2018.