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TMI Blog2018 (8) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 dated 11.07.2018. When the appeal was called for hearing before the Bench, the learned counsel for the assessee at the outset fairly submitted that these two appeals are not low tax effect appeal as these appeals are not covered by aforesaid CBDT circular dated 11.07.2018. It was also submitted by learned counsel for the assessee that these two appeals are otherwise covered by Mumbai-tribunal decision in assessee's own case for earlier years as well several decisions of Hon'ble Superior Courts . Thus, these appeals were taken up for hearing by the Bench with the consent of both the counsels of rival parties. First we will take up Revenue's appeal in ITA no. 3845/Mum/2018 for AY 2013-14. The grounds of appeal raised by Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:- " 1) "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to restrict the disallowance to the extent of the exempt income ignoring the fact that the Hon'ble Bombay High Court in the case of M/s Godrej & Boyce Manufacturing Company Limited has held that the disallowance u/s 14A is to be wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cases : a) Shivam Motors Private Limited (2015) 55 taxmann.com 262(All. HC) b) CIT v. Corrtech Energy Private Limited (2014) 45 taxmann.com 116( Guj. HC) c) Delite Enterprises (2010) 8 taxmann.com 10 (Bom. HC) d) CIT v. Winsome Textiles Industries Limited 319 ITR 204(P&H) e)Joint Investments Private Limited v. CIT (2015) 372 ITR 694 (Del. HC) f) Pr. CIT v. Empire Package Private Limited (2017) 81 taxmann.com 108 (P&H HC) 4. That's how Revenue is in appeal before us being aggrieved by relief granted by learned CIT(A). The learned DR relied upon assessment order passed by the AO while the learned counsel for the assessee relied upon decision of the Mumbai-tribunal in assessee's own case in ITA no. 3320/Mum/2016 for AY 2011-12, order dated 09.11.2017, wherein Accountant Member was part of Division Bench who passed the said order. 5. We have carefully gone through the entire material on records, case laws cited by rival parties and heard the rival counsel's. The assessee is engaged in the business of manufacturing of electronic items like LCD/LED televisions, washing machines , air conditioners and also trading of air conditioners , DVD, Microwave ovens and mobiles. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, sitting fee of Rs. 1.25 lakh etc to uphold the disallowance based on Rule 8D(2)(iii) r.w.s. 14A after arriving at the conclusion that the claim of the assessee of applying 05% to salary of GM(Finance) to arrive at disallowance u/s 14A is not correct. We have observed that during the year under consideration, investments held by the assessee at the beginning of the year was Rs. 40.14 crore which has come down to Rs. 26.54 crores as at the end of the year. The assessee has sold the investments during the year which comprised mutual fund which mainly led to fall in investments held by the assessee as at year end vis-a-vis held at the beginning of the year. The assessee has offered disallowance computed @0.5% of the salary of GM ( Finance) u/s. 14A . The tribunal in the preceding year i.e. AY 2010-11 has held further disallowance of Rs. 50,000/- towards administrative expenses will meet the end of the justice. The authorities below have not gone deeply into the accounts and affairs of the assessee to find out who all were responsible for handling investments and to identify the expenditure/cost incurred towards the earning of the exempt income . The authorities below did not call fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of non recording of proper satisfaction by the authorities below as is mandated u/s 14A of the 1961 Act before invoking Rule 8D of the 1962 Rules and also with a view to maintain consistency and judicial discipline by following decision of the tribunal for earlier year in assessee's own case.The tribunal while passing orders for AY 2011-12 relied upon Hon'ble Supreme Court in the case of Godrej and Boyce Manufacturing Company Limited v. DCIT (2017) 394 ITR 449(SC) . The assessee in AY 2011-12 received dividend income of Rs. 44,69,167/- which was claimed as an exempt income u/s 10(34) of the 1961 Act ,while the assessee in the instant year under consideration before us received dividend income of Rs. 97,314/- which was claimed as an exempt income u/s 10(34) of the 1961 Act. The disallowance of expenditure u/s 14A of the 1961 Act was made by the AO towards expenses incurred in relation to earning of an exempt income by invoking Rule 8D(2)(iii) of the 1962 Rules wherein 0.5% of average value of investment held by the assessee was disallowed u/s 14A of the 1961 Act. Keeping in view factual matrix of the case for the instant year under consideration which is distinct from AY 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound, that the Tribunal remanded the matter to the Assessing Officer, so as to reach a conclusion as to whether investments had been actually made, in sister concerns of the Assessee, out of interest free funds, albeit, for strategic purposes. 8. According to us, this exercise, in the given facts which emerge from the record, was clearly unnecessary, as the CIT(A) had returned the finding of fact that no dividend had been earned in the relevant assessment year, with which, we are concerned, in the present appeal. 9. In our opinion Section 14 A of the Act, can only be triggered, if, the Assessee seeks to square off expenditure against income which does not form part of the total income under the Act. 9.1 The legislature, in order to do away with the pernicious practice adopted by the Assessees', to claim expenditure, against income exempt from tax, introduced the said provision. 10. In the instant case, there is no dispute that no income i.e., dividend, which did not form part of total income of the Assessee was earned in the relevant assessment year. 10.1 Therefore, to our minds, the addition made by the Assessing Officer by relying upon Section 14 A of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year in issue. The order of assessment records a finding of fact to that effect. The issue to be decided thus lies within the short compass of whether a disallowance in terms of s.14A of the Act read with Rule 8D of the Rules can be contemplated even in a situation where no exempt income has admittedly been earned by the assessee in the relevant financial year. 7. Per contra, Sri. T. Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s.14 A pointing out that the provision would apply not only where exempted income is 'included' in the total income, but also where exempt income is 'includable' in total income. 8. He relied upon a Circular issued by the Central Board of Direct taxes in Circular No.5 of 2014 dated 11.2.2014 to the effect that s.14A was intended to cover even those situations whether there is a possibility of exempt income being earned in future. The Circular, at paragraph 4, states that it is not necessary for exempt income to have been included in the income of a particular year for the disallowance to be triggered. According to the Learned Standing Counsel, the provisions of s.14A are made appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artifice too far. (emphasis is ours)" 13. Mr.Senthil Kumar, seeks to distinguish the judgment in Redington (India) Ltd. case (supra) based on the fact that Rule 8D had not kicked-in by AY 2007-08, which was the AY being considered in the said case. 14. According to us, this was not the argument, put forth, before the Division Bench. As a matter of fact, the Revenue relied heavily on Rule 8D. 14.1 Mr.Ravikumar, who appeared for the Revenue, in that matter and who is present in this Court, informs us that he had in fact argued that the Rule was clarifactory in nature and would apply retrospectively, and that, the Division Bench, therefore, discussed the impact of Rule 8D of the Rules. 15. However, it is, our view, as indicated above, independent of the reasoning given in Redington (India) Ltd. case (supra) that Rule 8D cannot be read in a manner, which takes it beyond the scope and content of the main provision, which is, Section 14 A of the Act. 15.1 Therefore, as adverted to above, Rule 8D, cannot come to the rescue of the Revenue. 15.2 In any event, the Tribunal, via, the impugned judgment has remitted the matter to the Assessing Officer. 15.3 Therefore, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4050/Mum/2016 for AY 2011-12 wherein vide orders dated 31.01.2018 , the tribunal allowed the claim of the assessee for depreciation @30% on moulds(plastic) used by the assessee for manufacturing of electronic goods by following earlier year decisions passed by the tribunal in assessee's own case. The AO while disallowing the claim of the assessee for depreciation @30% on moulds(plastic) used for manufacturing of electronic goods wherein the AO allowed depreciation @15% on such moulds(plastic) , although the AO noted that the tribunal has allowed the depreciation @30% on moulds(plastic) used for electronic items manufactured by the assessee but the AO observed that the claim cannot be allowed as Revenue has not accepted decision of the tribunal and appeal is filed by Revenue with Hon'ble Bombay High Court against decision of the tribunal granting relief to the assessee. The learned DR before us relied on assessment order passed by the AO while learned counsel for the assessee relied upon tribunal's order for earlier years. 7. We have heard rival parties and perused material on record including orders of authorities below and tribunal orders for earlier years relied upon . We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reproduced below: - "We have carefully considered the rival submissions La the light of the material placed before us. It is a question of allowance of depredation 30% vis-à-vis 25%. The contention of the assessee that in the past, such depredation has been granted A36W. Learned CIT(A) had invoked Section 263 and order of Ld.CIT was quashed by the Tribunal. Therefore, in view of the consistency, we are of the opinion that the claim of the assessee should have been accepted by the Assessing Officer as no new facts have been brought on record to justify for different stand taken during the year under consideration and such view is supported by Hon'ble Supreme court in the case of Radhasoami Satsang v. CIT (193 ITR 321). Accordingly, this ground of the appellant is allowed". It is also observed that vide its orders dated 18.03.2013 and 29.05.2015 for A.Ys.2007-08 and 2008-09 respectively, the Hon'ble Tribunal directed the A.O. to allow depreciation on moulds at 30% as claimed by it. Since there is no change in the facts of the case on this issue, it is held that the appellant is entitled to claim depreciation on moulds @ 30% respectfully following the aforesaid or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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