DCIT 1(1)(1), MUMBAI vs. BENNNETT PROPERTY HOLDING COMPANY LTD, MUMBAI

Bennett Property DCIT 1(1)(1) Holding Company Ltd. 579, Aayakar Bhavan, M. K. 5th Floor, Times Tower, Road, Mumbai-400020 बिधम/ K. Kamala Mills Compound, Senapati Vs. Bapat marg, Lower Parel(W), Mumbai-400012 स्थायीलेखासं./जीआइआरसं./ PAN No. AAECS3180H (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Suman Kumar प्रत्यथीकीओरसे/Respondentby : Shri S. Venkatraman सुनवाईकीतारीख/ : 26/02/2018 Date of Hearing घोषणाकीतारीख / 28/02/2018 : Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

Bennett Property Holding Company Ltd. (1) "Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in restricting the disallowance to Rs. 5,66,902/- as against Rs. 2,62,40,605/- made by the A.O. without appreciating the fact that section 14A r.w. Rule 8D is squarely applicable in this case and disallowance has to be made as per the formula give in Rule 8D."

The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal.

2. The brief facts of the case are that the assessee has e-filed its original return of income on 29.09.2012 declaring total income of Rs. 33,93,73,990/-. Subsequently, revised return was filed online on 25.03.2014 declaring the same income. The assessment was completed by the AO u/s.143(3) of the Income- tax Act, 1961 on 20.03.2015 and the total income was determined at Rs. 36,50,47,700/- under normal provisions of the Act. In the assessment order, the AO made disallowance u/s. 14A of I.T. Act of Rs. 2,56,73,703/-.

Bennett Property Holding Company Ltd. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties allowed the appeal of the assessee thereby deleting the additions made by the AO by invoking rule 8D of the I.T. Act. Now before us, the revenue has preferred the present appeal by raising the above grounds.

Ground No. 1 3. The sole ground raised by the revenue relates to challenging the order of Ld. CIT(A) in restricting the disallowance to Rs. 5,66,902/- as against Rs. 2,62,40,605/- made by the A.O. without appreciating the fact that section 14A r.w. Rule 8D is squarely applicable in this case and disallowance has to be made as per the formula give in Rule 8D.

Bennett Property Holding Company Ltd. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 5.1 & 5.2 of its order and the same is reproduced below:-

5.1 The Appellant, pursuant to a Scheme of Arrangements under Section 391 to 394 of the Companies Act, 1956, had acquired the real estate division that included units of mutual funds, with effect from 1st April 2011. Consequently, the Appellant had not borrowed any monies for investment in units. The expenses, other than those which related to the real estate division, aggregating Rs.33,72,029/- were, therefore, attributable also to the earning of the exempt income from units. The Appellant hence allocated the common expenses incurred in the ratio of exempt income to total income and disallowed Rs.5,66,902/- under Section 14A of the I.T. Act, 1961 while filing its return of income. The observations of the Ld. A.O. in para 5.2 of his order to invoke Rule 8D clearly show that he has not arrived at any objective satisfaction with regard to the correctness of the claim of the Bennett Property Holding Company Ltd. Appellant to disallow the common expenses in the ratio of exempt income to total income under Sec. 14A of the I.T. Act. The observations in the decision of the Hon'ble Bombay High Court in Godrej 86 Boyce Mfg. Co. Ltd. vs. DCIT (328 ITR 81) relied upon by the Ld. AR, clearly lay down that the A.O. has to arrive at an objective satisfaction as to the correctness of the disallowance made by the appellant before seeking to invoke Rule 8D. A.O. cannot ipso facto invoke Rule 8D straight away without coming to such a satisfaction. In the instant case, the appellant company itself disallowed Rs. 5,66,902/-in connection with exempted income.

5.2 In the circumstances, respectfully following the decision of the jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT (328 ITR 81), I am inclined to agree with the submissions of the Ld. AR. The addition of Rs.2,56,73,703/- made by the A.O. by invoking Rule 8D is, therefore, deleted.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities, we find that Ld. CIT(A) after considering the facts had rightly relied upon the judgment rendered by Hon’ble Bombay High Court in Bennett Property Holding Company Ltd. the case of Godrej and Boyce Manufacturing Co. Ltd. Vrs. DCIT (328 ITR 81) wherein it has categorically laid down that the A.O. has to arrive at an objective satisfaction as to the correctness of the disallowance made by the assessee before seeking to invoke Rule 8D. The A.O. cannot ipso facto invoke Rule 8D straight away without coming to such a satisfaction. In the instant case, the assessee company itself disallowed Rs. 5,66,902/-in connection with exempted income. However the AO had not recorded his satisfaction regarding the correctness of disallowance made by the assesses. Hence in these circumstances, the Ld. CIT(A) rightly deleted the additions made by AO in contravention of rule 8D.

Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are Bennett Property Holding Company Ltd. judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed.