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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Revenue, pertaining to the Assessment Year 2010-2011, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-VI, Kolkata, in Appeal No.67/12- 13/CIT(A)-VI/Cir-5/Kol, dated 06.12.2013, which in turn arises out of an order passed by the Assessing Officer (AO), Under Section 143(3) of the Income Tax Act 1961, (in short the ‘Act’), dated 30.01.2013.
Brief facts of the case qua the assessee are that the assessee company was engaged in the business of Investment Holding Company. It filed its return of income on 06.10.2010 declaring total income of Rs.73,00,020/-. Asessee’s case was selected for scrutiny u/s.143(3) and the AO has completed the assessment making disallowance of Rs.2,47,04,283/- u/s.14A r.w.rule 8D of the I.T.Rules. M/s Pilani Investment and Industries Corporation Ltd.
Aggrieved from the order of the AO, the assessee filed an appeal before the ld. CIT(A), who has deleted the addition so made by the AO after having the following observations :-
8.2 I have considered the facts of the case. As mentioned earlier, the appellant had, in its return, itself offered an amount of Rs.72,69,153/- as disallowance u/s 14A. The assessing officer has, however, made disallowance by invoking Rule 8D. The said rule has been framed with reference to sub-section (2) of Section 14A which reads as under:-
"The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act." Thus, the assessing officer is required to determine expenditure incurred in relation to exempt income in accordance with the prescribed method, i.e. Rule 8D, only if he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Several judicial rulings, including that of the jurisdictional bench of tribunal in the case of Ashish- Jhunjhunwala, also support this proposition. Recording of such satisfaction does not mean only a general mention regarding non-satisfaction but also some reasoning, even if on prima facie basis, for the same. 8.3 Though the assessing officer has mentioned that he was not satisfied with claim of the appellant, he has stated so in a very general manner and not disproved the claim of the appellant. The only justification given by him is that the explanation given by the appellant was not logical, reasonable and meeting the intention of law. He has also stated, that the disallowance offered was on estimate basis, which, as shall be discussed later, is factually incorrect. 8.4. As the claim of the appellant in respect of the expenses relating to exempt income has not been examined properly by the assessing officer, the same has been examined by the undersigned. It is seen, that out of the expenses debited in the P&L a/c, the appellant has added back, in its computation of business income, the expenses relating to rental income. Thereafter, all other expenses which were not related to renting of properties have been fully disallowed u/s 14A of the I.T Act, 1961 by the appellant. Thus, there remains no other expense, which can be disallowed. It may be mentioned that the issue was also involved in the immediately M/s Pilani Investment and Industries Corporation Ltd. preceding year i.e. AY: 2009-10 and hence came up in appeal no. 143/CIT(A)-VI/Cir-5/11-12/Kol. While deciding the said appeal, my Id. predecessor, vide his order dated 21.06.2012, has given the following findings in para 9 of the order- "Therefore, I am satisfied that all the expenses incurred by the appellant against earning of dividend income, interest income have been disallowed and no other expenses under Rule 8D read with section 14A of the I.TAct, 1961 can be disallowed. " The facts in the year under consideration are identical. Therefore, following the reasoning of my Id. predecessor and considering that the appellant has already disallowed all the expenses relating, directly or indirectly, to the exempt income, it is held, that no further disallowance under Rule 8D is required to be made. Considering this, the further disallowance of Rs. 2,47,04,283/- made by the assessing officer is deleted.”
Not being satisfied with the order of ld. CIT(A), the revenue is in appeal before us, and has taken the following grounds of appeal :-
1. That on the facts and in the circumstances of the case, the CIT(A) erred in holding that further disallowance u/s14A of Rs.2,47,04,238/- in addition to suo-moto disallowance of Rs.72,69,153/- was not warranted, ignoring the fact that in view of CBDT circular No. 5/2014 and decision of Hon'ble Delhi High Court in the case of ITO Vs Cheminvest Ltd. wherein it was held that even if in any particular year the assessee has not received any exempt income, disallowance can be made U/s 14A read with rule 8D. 2 That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal before or at the time of hearing of the Appeal.