2019 (2) TMI 1764 - AT - Income Tax

Disallowance u/s 14A - mandation of recording satisfaction - HELD THAT - As decided in own case 2018 (10) TMI 1751 - ITAT MUMBAI Satisfaction is mandatory in view of the above decision of Hon ble Supreme Court in the case of Maxopp Investment Ltd 2018 (3) TMI 805 - SUPREME COURT and in the present case there is no whisper about rejection of assessee s contention of expenses disallowed suo moto in relation to earning of exempt income. Hence according to us there is no satisfaction recorded by the AO for rejection of the assessee s disallowance and accordingly we delete the disallowance. MAT computation u/s 115JB - This issue is squarely covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of Vireet Investments (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned Sr. DR could not controvert the above proposition. Accordingly we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra). Respectfully following the same we delete the disallowance and allow this issue of assessee s appeal.

Summary

Issues:
1. Disallowance under section 14A read with Rule 8D of the Income Tax Rules.
2. Addition of disallowance under section 14A for computation of Book Profits under section 115JB of the Act.

Analysis:

*Issue 1: Disallowance under section 14A read with Rule 8D of the Income Tax Rules*

The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The Assessing Officer (AO) had disallowed an amount under section 14A read with rule 8D, which was partly reduced by the CIT (A). The AO calculated the disallowance despite the assessee's claim that no expenditure was incurred towards earning exempt income. The CIT (A) observed that the AO did not provide reasons for the disallowance made and that the assessee had already made a suo moto disallowance. The Tribunal referred to a previous decision in the assessee's own case for AY 2008-09 and 2009-10 where a similar disallowance was deleted. The Tribunal held that the AO must record satisfaction before applying the disallowance and since no such satisfaction was recorded, the disallowance was deleted.

*Issue 2: Addition of disallowance under section 14A for computation of Book Profits under section 115JB of the Act*

The second ground of appeal related to the addition of disallowance under section 14A for the computation of Book Profits under section 115JB of the Act. The Tribunal noted that a similar issue had been decided in favor of the assessee in previous years. Referring to a Special Bench decision, the Tribunal held that no disallowance under section 14A read with rule 8D could be made while computing book profits under section 115JB. As the facts of the present case were identical to previous cases, the Tribunal allowed this ground of appeal.

In conclusion, the Tribunal allowed the appeal filed by the assessee for the assessment year 2011-2012 based on the decisions in the assessee's own cases for previous assessment years. The disallowance under section 14A read with Rule 8D and the addition of disallowance for the computation of Book Profits under section 115JB were both deleted in favor of the assessee.

The order was pronounced in the open court on 15th February 2019.