J.K. HELENE CURTIS LTD,THANE vs. DCIT 2(2)(1), MUMBAI

The present appeal filed by the assessee is directed against the order passed by the CIT(A)-6, Mumbai dated 06.02.2017 for A.Y. 2013-14, which in turn arises from the order passed by the A.O under Section 143(3) of the Income Tax Act, 1961 (hereinafter "the Act") dated 30.09.2015.

Briefly stated, the assessee had e-filed its return of income for A.Y. 2013-14 on 24.09.2013, declaring total income at Rs. 29,39,90,610/- under the regular provisions of the Act and book profit of Rs. 29,45,27,487/- under Section 115JB of the Act. The case of the assessee was thereafter selected for scrutiny assessment under Section 143(3) of the Act. During the course of assessment proceedings it was observed by the AO that the assessee company which had earned exempt dividend income of Rs. 2,64,06,698/- from investments made in equity shares and units of mutual funds, had offered a disallowance of only Rs. 99,185/- as “expenses relating to exempt income” in its return of income. It was noticed by the AO that the aforesaid disallowance was arrived at by the assessee on an estimate basis and not as per the manner laid down in M/s. J.K. Helene Curtis Ltd. Rule 8D of the I.T. Rules, 1963. The AO not being satisfied by the disallowance offered by the assessee as regards earning of exempt dividend income and being of the view that it was obligatory on its part to have worked out the disallowance under Section 14A r.w. Rule 8D, thus, worked out the disallowance under Rule 8D(iii) at an amount of Rs. 30,96,098/-. In the backdrop of the aforesaid facts, the AO considering the suo motto disallowance of Rs. 99,185/- which was offered by the assessee in its return of income, thus made a further disallowance of Rs. 29,96,913/- (Rs. 30,96.098 – Rs. 99,185/-) in the hands of the assessee company.

Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). However, the CIT(A) not being persuaded to subscribe to the contentions advanced by the assessee upheld the order of the AO and dismissed the appeal.

The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The learned Authorised representative (for short „A.R‟) for the assessee, at the very outset of hearing of the appeal submitted that a similar disallowance under Section 14A r.w. Rule 8D was made in the case of the assessee in the preceding years, viz. A.Y. 2011-12 and A.Y. 2012-13. It was submitted by the learned A.R. that on appeal by the assessee company for A.Y. 2011-12 a coordinate Bench of the Tribunal i.e ITAT “A” Bench, Mumbai had vide its order passed in dated 29.07.2016 restored the matter to the file of the A.O for fresh adjudication of the disallowance under Sec. 14A. It was further submitted by the learned A.R. that the ITAT “H” Bench, Mumbai while disposing off the appeal of the assessee for A.Y. 2012-13 involving a similar issue, had vide its order passed in ITA No. 7588/Mum/2016, dated 05.02.2018 followed the aforesaid order of the Tribunal for A.Y. 2011-12 and had restored the matter as regards determining of the disallowance under Section 14A r.w. Rule 8D to the file of the AO. In the backdrop of the aforesaid facts, it was submitted by the learned A.R. that as the issue pertaining to disallowance under Sec. 14A r.w Rule 8D involved in the present appeal of the assessee company was the same as was there before

We have heard the learned Representatives for both the parties, perused the orders of the lower authorities and the material available on record. We have deliberated at length on the issue under consideration and find that the same pertains to the disallowance made by the A.O under Section 14A r.w Rule 8D, as against that which was offered by the assessee in its return of income on an estimate basis. We, find ourselves in agreement with the contention of the learned A.R. that the issue as regards the disallowance made by the A.O under Section 14A r.w Rule 8D, on appeal by the assessee in the preceding years i.e A.Y 2011-12 and A.Y 2012-13 was restored by the Tribunal to the file of the AO for fresh adjudication. On a perusal of the order of the Coordinate Bench of the Tribunal, as had been placed on record, it emerges that in A.Y. 2011-12 the issue before the Tribunal pertained to disallowance under Section 14A r.w Rule 8D(ii)&(iii), which was restored to the file of the AO with two fold directions, viz. (i) that necessary verification as regards the claim of the assessee that the investments were made out of its own funds and no borrowed funds were used be carried out; and (ii) that the claim that as the investments were strategic in nature and not made with the motive of earning dividend, therefore, provisions of Section 14A of the Act read with Rule 8D cannot be invoked be adjudicated after necessary verification. We further find that the aforesaid order was thereafter followed by the Tribunal while disposing off the appeal of the assessee for A.Y. 2012-13. We have deliberated at length on the issue under consideration and are of the considered view that as in the case before us the A.O had made a disallowance under Sec. 14A r.w Rule 8D(2)(iii), thus as agreed between the parties, the matter in all fairness on the same terms is restored to the file of the A.O for fresh adjudication. The A.O is directed to readjudicate the issue under consideration as per the extant law. Needless to say, the M/s. J.K. Helene Curtis Ltd. A.O shall in the course of the set aside proceedings afford reasonable opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.