JAGUAR SERVICES P. LTD,MUMBAI vs. ITO RG 10(2)3, MUMBAI

Only grievance of the assessee relates to disallowance of Rs.2,73,936/- made by the AO u/s.14A r.w.rule 8D and thereby confirmed by the CIT(A).

Rival contentions have been heard and record perused. The facts of the case are that the assessee is engaged in the business of advertising and promotional activities. The assessee filed its return of income declaring total loss of Rs.9,40,449/-, which was processed 2 u/s.143(1) of the Act. During the assessment proceeding the AO did not accept the contention of assessee in regard to the expenses attributable to earning of the dividend income and disallowed the same. In appeal, the CIT(A) upheld the assessment order. Now, the assessee is in further appeal before us.

At the outset, ld. AR placed an order of Tribunal in assessee’s own case for the assessment year 2009-2010, wherein under similar facts and circumstances, matter was restored back to the file of AO after observing as under :- “6. We have considered the submissions of the Id. 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 but can be applied only if the assessee's method is not satisfactory. It has been further held that Rule 8D is not retrospective and applies from A.Y. 2008-09. It may be further observed 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. However, a perusal of the assessment order reveals that the AO without recording any dissatisfaction with regard to the computation/working given by the assessee relating to the expenditure incurred for earning the exempt income, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The ld. CIT(A) also wrongly held that the rule 8D was mandatorily applicable while confirming the disallowance.

So keeping in view of the overall facts and circumstances of the case, we restore this issue back to the file of the AO with a direction that the AO will examine the computation/calculation made in this regard by the assessee. The AO will be at liberty to call for any record/evidences or statement etc. from the assessee as may be required by him for deciding the issue under consideration. After going through the details provided by the assessee, if the AO will be satisfied with the objection/calculation made by the assessee then he will assess the income accordingly. However, if the AO does not agree with the computation made by the assessee and in that event, he will have to record his dissatisfaction with reasoning for the same by way of a speaking order, then he will be at liberty to 3 resort to the provisions of Rule 8D(2)(iii). Needless to say, the assessee will co-operate and promptly supply the necessary details, to the AO for deciding the issue under consideration. It is made clear that our above directions are with respect to the issue of disallowance u/s.14A r.w.r.8D(2)(iii) only.”

We have carefully gone through the orders of authorities below and found that on the very same reasoning the AO has made a disallowance u/s.14A r.w.rule 8D. The Tribunal has elaborately dealt with the issue at para 6 & 7 and thereafter restored the matter back to the file of AO with specific directions. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, this appeal is also restored back to the file of AO for deciding in terms of direction given by the Tribunal in its order dated 9-4-2014 in assessee’s own case for the assessment year 2009-2010.

In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 04/05/ 2016. Sd/- Sd/- (SANJAY GARG) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 13/05/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. आदेशाि सार/ BY ORDER, सत्मावऩत प्रनत //True Copy//