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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned orders dated 29/07/2011 and 19/09/2013 for Assessment year 2009-10 & 2010-11 respectively, of the ld. First Appellate Authority, Mumbai.
During hearing of this appeal, we have heard Shri Rishabh Shah, ld. counsel for the assessee and shri Chandip Singh, ld. DR. At the outset, the ld. counsel for the assessee did not press ground no.2 (ITA NO.6680/Mum/2013) with respect to disallowance of Rs.2,03,162/- under the head share issue expenses. The ld. DR had no objection, therefore, this ground is dismissed as not pressed.
2.1. With respect to rejection of claim of assessee u/s 14A(2) read with Rule 8D of the Income Tax Rules. It was contended by the ld. counsel that for A.Y. 2008-09, identically, the issue was remanded back to the file of ld. Assessing Officer as no borrowed funds were used by the assessee. The ld. counsel placed on record copy of the order of the Tribunal dated 23/11/2012 (ITA No.8187/Mum /2011). It was prayed that since the issue and facts are identical, both these appeals may be sent to 3 M/s Valuable Infrastructure Pvt. Ltd. & M/s Valuable Technologies Ltd. 6680/Mum/2013 the file of the Assessing Officer. This factual matrix/prayer was not controverted by ld. DR.
2.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion of the order dated 23/11/2012 (A.Y. 2008-09) for ready reference:-
“This appeal by the assessee is directed against the order of the CIT[A]-18 Mumbai dated 29.07.2011 pertaining to the assessment year 2008 -09 .
2. The assessee has shown its grievance by raising two grounds of appeal.By Ground No.1 , the assessee has challenged the correctness of the orders of the lower authorities who ought to have considered the disallowable expenditure as computed by the assessee as per the provisions of Sec.14A[2] of the Act.
Briefly stated the facts of the case are that for the year under consideration the assessee filed its return of income electronically on 16.06.2009 declaring total income at Rs. 37,72,32,984.00 . The return was selected for scrutiny assessment and accordingly statutory notices u/s 143[2] / 142[1]] were issued and served upon the assessee.
During the course of the assessment proceedings the AO noticed that the assessee has earned dividend income of Rs.11096991.00 which it claimed to be exempt from tax .
4 M/s Valuable Infrastructure Pvt. Ltd. & M/s Valuable Technologies Ltd. 6680/Mum/2013 The AO observed that the assessee has not attributed any expenditure for earning exempt income nor it has disallowed any expense in its computation of income for the year under consideration. The AO invoked the provisions of sec.14A r.w rule 8D of the Act, and calculated the disallowable expenditure at Rs.14,06,325.00 , and added to the income of the assessee .
The assessee carried the matter before the CIT[A] but without any success. The CIT[A] confirmed the disallowable expenditure as calculated by the AO on the ground that such disallowance is supported by the decision of the Honb’le High Court of Bombay in the case of Godrej & Boyce 328 ITR 81 .
Assessee is aggrieved by this finding of the CIT[A] and is before us. The counsel for the assessee submitted that the order of the CIT[A] is against the facts of the case and provisions of sec.14A[2] . The counsel argued that the AO grossly erred in not accepting the computation of disallowable expenditure as submitted by the assessee during the course of the assessment proceedings. The counsel drew our attention to the working exhibited at page 2 of the paper book submitted during the course of this appellate proceeding and submitted that the total disallowable expense comes to only Rs. 2,200.00.
Per contra Ld. DR relied upon the findings of the lower authorities.
5 M/s Valuable Infrastructure Pvt. Ltd. & M/s Valuable Technologies Ltd. 6680/Mum/2013 8. We have heard the rival submissions and perused the orders of the lower authorities and also the 3 pages paper book submitted by the Counsel before us. The undisputed fact is that the assessee has earned dividend income which it claimed to be exempt from tax. It is also not in dispute that proportionate expenses are to be disallowed for earning exempt income as per the provisions of sec.14A r.w rule 8D of the Act. However, at the same time it is incumbent upon the AO to first verify the disallowable expenditure as calculated by the assessee in the light of the provisions of Sec.14A[2] of the Act, which is as under:
2) 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 the 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.
As the assessee has given a calculation of disallowable expenditure during the course of the assessment proceedings itself which the AO ought to have considered before proceeding further and the same has also not been accepted by the CIT[A] , we have no hesitation to hold that both the lower authorities have erred .
6 M/s Valuable Infrastructure Pvt. Ltd. & M/s Valuable Technologies Ltd. 6680/Mum/2013 10. In the interest of justice and fair play, we restore this issue back to the files of the AO . The AO is directed to consider the calculation of the assessee for disallowable expenditure in the light of the facts of the case. The AO is also directed to verify the investments vis-a-vis borrowed funds, whether the assessee has incurred any finance cost, after giving areasonable opportunity of being heard to the assessee. Ground No.1 is allowed for statistical purpose.”
2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel and the conclusion drawn in the order of the Tribunal dated 23/11/2012 (supra), if kept in juxtaposition and analyzed, we find that the Bench for A.Y. 2008-09, in view of the decision from Hon’ble jurisdictional High Court in Godrej & Boyce 328 ITR 81 (Bom.) restored the matter back to the file of the Assessing Officer to consider the calculation of the assessee for disallowable expenditure in accordance with law by analyzing/verifying investments vis-à-vis borrowed funds after providing reasonable opportunity of being heard to the assessee. Since the facts are identical, we remand both these appeals to the file of the ld. Assessing Officer to examine the claim of the assessee afresh, in the light of the decision from Hon’ble jurisdictional High Court in Godrej & Boyce (supra) and decide in accordance with law. The assessee be given
7 M/s Valuable Infrastructure Pvt. Ltd. & M/s Valuable Technologies Ltd. 6680/Mum/2013 opportunity of being heard. Thus, both the appeals are disposed off in terms indicated hereinabove.
Finally, appeal in is partly allowed for statistical purposes.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 06/10/2015.