2017 (12) TMI 1870 - HC - Income Tax

Disallowance u/s 14A read with Rule 8D - mandation to recording satisfaction - ITAT upholding CIT(A)'s order of deleting addition - ITAT deleted addition - HELD THAT - Whether the satisfaction of the Assessing Officer u/s 14A(2) that the disallowance offered by the Assessee, having regard to the Accounts, is not correct, is a sine-qua -non before invoking Rule 8D(2) of the Income Tax Rules. It is also an agreed position that it is so, in view of the decision of the Supreme Court in Godrej Boyce Manufacturing Co. Ltd 2017 (5) TMI 403 - SUPREME COURT - Thus, no fault can be found with the impugned order. Character of the income derived - income derived from letting out of the premises of the I.T. Park - 'Business Income' or income from property - HELD THAT - Revenue states that he is not pressing this question in view of the CBDT Circular No.16 of 2017 dated 25th April, 2017 as clarified that income arising from the letting out of the premises in an Industrial Park/ SEZ, are to be charged under the head 'Profits and gains of business' and not under the head 'Income from house property'

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal regarding disallowance under section 14A and characterization of income derived from letting out premises.

Analysis:
1. The appellant challenged the Tribunal's order regarding the disallowance under section 14A and the characterization of income derived from letting out premises. The first question of law raised was whether the Tribunal was correct in upholding the order of the Commissioner of Income Tax (Appeal) deleting the disallowance under section 14A read with Rule 8D of the Rules. The court noted that the Assessing Officer's satisfaction under Section 14A(2) of the Act, regarding the disallowance offered by the Assessee, is crucial before invoking Rule 8D(2) of the Income Tax Rules. Citing the decision of the Supreme Court in Godrej & Boyce Manufacturing Co. Ltd., the court held that no fault could be found with the impugned order, as it was in line with the legal provisions. Therefore, Question No.1 was not entertained as it did not give rise to any substantial question of law.

2. The second question of law raised was whether the income derived from letting out of premises in an Industrial Park should be assessed as 'Business Income' or 'Income from house property.' The appellant, however, decided not to press this question in light of the CBDT Circular No.16 of 2017 dated 25th April, 2017. The circular clarified that income from letting out premises in an Industrial Park/SEZ should be charged under the head 'Profits and gains of business' and not under 'Income from house property.' Consequently, the court did not consider this question as it was not being pressed by the appellant.

3. In conclusion, the High Court of Bombay dismissed the appeal, stating that there was no need to delve into the questions raised due to the reasons mentioned above. No order as to costs was given in this matter.