ITO 8(2)-3, MUMBAI vs. SANJAY MAGANLAL MEHTA, MUMBAI

The aforesaid appeal has been filed by the Revenue against impugned order dated 04/06/2013 passed by the CIT(A)-17, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2010-11, on the following grounds:-

1) "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs. 11,60,9671- made by the Assessing Officer u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the I. T. Rules, 1962 without appreciating that Rule 8D has been inserted by the Finance Act, 2008, with effect from 24/03/2008, and hence squarely applicable to the Assessment Year under consideration."

2) "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in importing the ratio of the decision of the Hon'ble Bombay High Court in the case of CIT Vs Reliance Utilities and Power Ltd (313 ITR 340) without appreciating that- a) the issue before the Hon'ble High Court in the above cited case pertained to disallowance of interest on borrowed funds u/s 36(1)(iii) for AY 1999-2000 and not in respect of disallowance u/s 14A and hence not applicable to the instant case; b) in view of the proportionate disallowance stipulated in Rule 8D(2)(ii), nexus between investments vis-a-vis borrowed or own funds is no longer required to be established by the Assessing Officer; c) once Rule 8D is invoked, the disallowance has to be worked out as per the formula prescribed therein and there is no scope for any deviation there from. "

3) "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance u/s 14A read with Rule 8D on the ground that there is no disallowance u/s 14A in the earlier years, without appreciating that the principle of res judicata is not applicable to the proceedings under the Income-tax Act.”

4) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that netting of interest is to be done before disallowance u/s 14A, without appreciating that once the assessee has incurred interest expenditure in relation to exempt income, the entire interest would be subject to disallowance and cannot be reduced by receipt of interest which is not related thereto and which would result in contravening clause 2(ii) of Rule 8D , as held by the Hon'ble ITAT Special Bench Delhi in para 43 of its order in the case of Cheminvest Ltd. vs. ITO 317 ITR 86."

5) The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored.

6) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.

Order pronounced in the open court on 4th January, 2016