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Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI
Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM
This appeal has been preferred by the assessee against the impugned order dated 30/12/2013 passed by the Ld. CIT(Appeals)-41, Mumbai, for the Asst. year 2010-11.
Brief facts of the case are that the appellant/assessee, engaged in the business of trading of fabrics, trading of securities and investments, filed its return of income declaring loss of Rs. 93,901/-. After scrutiny, the AO made certain disallowances and passed assessment order determining the total income of the assessee at Rs. 27,37,400/-. The assessment order was challenged by the assessee before the CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee and against the said order the assessee has filed the present appeal on the following effective grounds:-
“1. The Learned Commissioner of Income Tax (Appeals)-41, Mumbai (“CIT(A)”), on the facts of the case and in law, erred in upholding the order of the Deputy Commissioner, Central Circle-33 (Assessing Officer)(“AO”) dated 11/02/2013, confirming additions of Rs.1,22,875, on account of disallowance of depreciation for alleged absence of manufacturing activities.
CIT(A) ought to have confined the disallowance to the actual amount of depreciation claimed as per Income Tax Rules, instead of confirming disallowance of depreciation as provided in books of accounts, as is evident from the order of AO itself and was further pointed out in the course of hearing.
2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming disallowance of Rs. 26,23,914/- u/s 14A read with Rule 8D.
CIT(A) ought to have followed the orders of his predecessor for AY 2009-10 when facts are exactly the same for assessment year under present appeal i.e. AY 2010-11 and nothing to contrary has been brought on records.”
We have heard the rival submissions of the parties and also perused the material placed before us. The first ground pertains to confirmation of disallowance of Rs. 1,22,875/- (depreciation claimed by the assessee on plant and machinery). We notice that Ld. CIT(A) has dismissed this ground of appeal holding that “The A.R. of the appellant in the course of hearing of the present appeal on 20.12,2013 stated that the appellant does not wish to press the ground anymore.” Before us, this ground was not pressed by the Ld. AR. Hence, we dismiss this ground of appeal as not pressed.
The second ground pertains to confirmation of disallowance of Rs. 26,23,914 under section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules. The Ld. Counsel for the assessee submitted that this ground of appeal
is covered in favour of the assessee by the decision dated17.9.2014 rendered by the ITAT Mumbai in assessee’s own case Dy. CIT vs Jayashree Petrochemicals. Pvt. Ltd., for the assessment year 2009-
10. On the other hand, the Ld. Departmental Representative, submitted that the Ld. CIT(A) was not bound to follow the order passed by his predecessor therefore there is no infirmity in the impugned order.
5. We notice that the identical issue was decided by the Ld. CIT(A) in assessee’s own appeal filed against the assessment order in respect of assessment year 2009-10. The said order was challenged by the department before the ITAT. The coordinate Bench of ITAT dismissed the revenue’s appeal holding as under:- “6. We have considered the rival submissions of the ld. representatives of the parties. It may be observed that in the case of ‘Godrej & Boyce Manufacturing Co. Ltd.’ 328 ITR 81, the Hon'ble Bombay High Court has held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable and also not retrospective and applies from A.Y. 2008-09. It has been further held that under section 14A of the Income Tax Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by the assessee in respect of such expenditure. The satisfaction of the Assessing Officer has to be arrived at, having
regard to the accounts of the assessee. Sub section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect such expenditure is correct. The satisfaction of the Assessing Officer must be arrived at on an objective basis. In a situation where the accounts of the assessee furnish an objective basis for the Assessing Officer to arrive at a satisfaction in regard to the correctness of the claim of the assessee, there would be no warrant for taking recourse to the method prescribed by the rules. An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his accounts and recording of reasons by the Assessing Officer in the event that he comes to the conclusion that he is not satisfied with the claim of the assessee.
However, a perusal of the assessment order reveals that the AO had not followed the guidelines of objective satisfaction as laid down by the Hon’ble Bombay High Court in Godrej & Boyce(supra) while making the disallowance. He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightaway applied Rule 8D against the mandate of the provisions of section 14 A of the Income Tax Act.
It may be further observed that rule 8D (2) (iii) can be invoked for calculating attributable expenses incurred towards earning of exempt income out of common administrative expenses. In the case in hand, the specific claim of the assessee that no administrative expenses for earning of exempt income of Rs. 625/– had been incurred by the assessee during the year under consideration, had not been denied
by the AO either, during the assessment proceedings, or during the relevant proceedings. The AO did not record any dissatisfaction regarding the above claim of the assessee. It was not the case of the AO that any expenditure was incurred by the assessee towards earning of exempt income in question out of the infrastructural and administrative expenses claimed to be incurred for earning of business income by the assessee. Even the assessee during the year had not made any investments. The dividend income of Rs. 6 25/– was earned by the assessee out of the earlier year investments. Even for the earlier year also, the disallowance made by the AO under rule 8D (2) (iii) on account of marginal and admin has been deleted by the tribunal vide on 25.07.12.”
This ground of appeal
is identical to the ground of appeal in assessee’s own case, Dy. CIT vs. Jayashree Petrochemicals. Pvt. Ltd. for the A.Y.2009
10. (supra) and the coordinate Bench vide order dated 17.9.2014, has already decided this issue in favour of the assessee. Therefore, respectfully following the order passed by the co-ordinate bench, we allow this ground of appeal of the assessee.