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Income Tax Appellate Tribunal, DELHI BENCH “E” BENCH NEW DELHI
Before: SHRI G.D. AGARWAL & SHRI KULDIP SINGH
Since the common questions of facts and law as to the deletion of disallowance u/s 14A read with Rule 8D of the Rules made by the Assessing Officer have been raised in the aforesaid appeals the same are being disposed off by way of consolidated order to avoid repetition of discussion.
The appellant, Deputy Commissioner of Income Tax, Central Circle-2, New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeals bearing 4337, 4338 and 4339 all assessment years 2011-12 sought to set aside the impugned orders dated 24.4.2015 passed by the Commissioner of Income Tax (Appeals)- 29, New Delhi qua the assessment years 2011-12 respectively deleting the disallowance under section 14A read with Rule 8D of the I.T. Act, 1961 (for short ‘the Act’), qua the assessment year 2011-12 on the grounds that: “On the facts and in the circumstances of the case and in law, the CIT (A) has erred in deleting the disallowance u/s 14A read with rule 8D of the Income Tax Rules, 1962 amounting to Rs. 81,57,398/-, 86,77,669/-, 46,69,226/- and 1,89,28,395/-
, in 4337, 4338 and 4339, in all assessment years 2011-12 respectively.”
Since all the aforesaid appeals are as to the deletion of addition made by the Assessing Officer u/s 14A read with Rule 8D have emanated from similar set of facts, the composite facts of appeal nos. 4336, 4337, 4338 and 4339 are taken to adjudicate the controversy at hand for the sake of brevity.
Briefly stated the facts necessary for adjudication of the controversy at hand are: the assessee is engaged in the business of non banking finance company and its main object is to make investment in telecom sector, a rented venture to promote the formation and mobilization and capital investment on behalf of its promoters. From the perusal of the P&L account the Assessing Officer noticed that the assessee has disallowed on account of expenses incurred in relation to the income not includable in total income an expenditure of Rs. 2,20,047/-, 3,95,510/-, 1,45,898/- and 12,71,477/- in to 4339 all assessment years 2011-12 respectively. 5. The Assessing Officer rejected the submission of the assessee that the disallowance u/s 14A read with Rule 8D is as per the calculation made by the tax auditor. The Assessing Officer proceeded to compute the disallowance as per the section 14A(2), 14(3) with amended Rule (ii) and (iii) and thereby made the disallowance to the tune of Rs. 81,57,398/-, 86,77,669/-, 46,69,226/- and 1,89,28,395/- in ITA no. 4336 to 4339 all assessment years 2011-12 respectively. 6. The assessee carried the matter before the Learned CIT(Appeals) by way of filing the appeals who has deleted the addition made by the Assessing Officer vide order dated 24.4.2015. Feeling aggrieved the revenue has come up before the Tribunal by way of filing the present appeal. 7. We have heard the Ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 8. Undisputedly, the assessee had made suo moto disallowance on account of expenditure to the tune of Rs. 2,20,047/-, 3,95,510/-, 1,45,898/- and 12,71,477/- in ITA nos. 4336, 4337, 4338 and 4339 all A.Y. 2011-12 qua the income not includable in total income u/s 14A read with Rule 8D and filed as per the calculation made by the tax auditor before the Assessing Officer. It is also not indispute that the assessee claimed exempt income of Rs. 25,58,731/-, Rs. 87,73,712/-, Rs. 5,05,679/- and Rs. 76,78,130/- on account of dividend earned. 9. In back drop of the aforesaid facts and circumstances of the questions arises in this case is: “as to whether the Assessing Officer has recorded his dissatisfaction qua the suo moto disallowance made by the assessee u/s 14A read with Rule 8D”.
The Hon'ble High Court of Delhi has dealt with the identical issue in the cases cited as Maxopp Investment Ltd. vs. Commissioner of Income Tax [2011] 15taxmann.com 390 (Delhi) and decided in favour of the assessee by holding that u/s 14A(2) the condition precedent for Assessing Officer is to determine an amount of expenditure in relation to the exempt income is that he must record his dissatisfaction with the correctness of the claim of expenditure suo moto made by the Assessing Officer.
The Hon'ble High Court of Delhi in the case of Commissioner of Income Tax-VI vs. Taikisha Engineering India Ltd. [2015] 54 taxmann.com 109 (Delhi) has held as under:-
“Section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules, 1962 Expenditure incurred in relation to income not includible in total income (Rule 8D) Assessment years 2008-09 and 2009-10. Whether it is only when computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income is found not satisfactory with reference to accounts, that computation under sub-rule (2) of the rule 8D is to be made – held, yes.”
The Ld. DR for the revenue by relying upon the judgment cited as in the case of Indiabulls Financial Services Ltd. vs. Deputy Commissioner of Income Tax, Circle-11(1) [2016] 76 taxmann.com 268 (Delhi) contended that merely because the Assessing Officer has not recorded his dissatisfaction about the assessee’s calculation, his calculations could not be rejected. The Ld. DR further relied upon the decision relied upon by the Hon'ble Supreme Court in the case cited as Godrej & Boyce Manufacturing Company Ltd. vs. Deputy Commissioner of Income Tax [2017] 81 taxmann.com111(SC).
Now adverting to the facts and circumstances of the when we perused the para 5 and 6 of the assessment order, there is no dissatisfaction expressed by the Assessing Officer as to why and under what circumstances the calculation made by the assessee to disallow suo moto expenditure is not correct. Rather the Assessing Officer proceeded to compute the disallowance as per the provisions of section 14A(2)(3) read with rule 8D(2)(3) by discussing the legal position only. 14. In Godrej & Boyce Manufacturing Company Ltd. vs. Deputy Commissioner of Income Tax (supra) the Hon'ble Supreme Court in para 37 also held that it is only after recording dissatisfaction by the Assessing Officer as to the calculation made by the assessee to make suo moto disallowance of expenditure, section 14A (2)(3) read with Rule 8D is attracted. So in the given circumstances the decision of the Hon'ble High Court in Indiabulls Financial Services Ltd. vs. Deputy Commissioner of Income Tax (supra) and the decision of the Godrej & Boyce Manufacturing Company Ltd. vs. Deputy Commissioner of Income Tax (supra) to the extent of applicability of section 14A read with section rule 8D of the Act is not applicable to the facts and circumstances of the case.
So when the Assessing Officer has failed to elucidate and explain as to how the suo moto disallowance as made by the assessee is not correct or unreasonable, provision contained u/s 14(2) read with Rule 8D are not attracted. So finding no illegality or perversity in the finding returned by the Learned CIT(Appeals) in the impugned orders challenged in the 4337, 4338 and 4339 for assessment years 2011-12, all the appeals preferred by the revenue are hereby dismissed.
In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 21.11.2017.