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TMI Blog2020 (1) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee carried the matter in appeal. The ld. First Appellate Authority granted relief by deleting the addition u/s 14A of the Act. While doing so, he followed the judgement of the Hon'ble Calcutta High Court in the case of CIT vs. Rajeev Lochan Kanoria [208 ITR 616] and held that, as the assessee company had acquired controlling interest by using borrowed funds for acquiring shares, the interest expenditure cannot be disallowed u/s 14A r.w.r. 8D(2)(ii). On disallowance of expenses under Rule 8D(2)(iii) of the Income Tax Rules, 1962 ('Rules'), he directed the Assessing Officer to recompute the disallowance by taking into account only those shares which had yielded dividend income. 3.Aggrieved the revenue is in appeal before us on the following grounds:- "1. "Whether on the facts and in circumstances of the case, Ld. CIT(A) erred in deleting the addition u/s 14A Rule-8D(2) of the LT. Act made by the AO and directed to re-compute the disallowance depending on the judicial pronouncement of Hon'ble ITAT, Kolkata without appreciating the fact that interest bearing loan fund was utilised in dividend earning investment made in group companies." 2."Whether on the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. 2.For that on the facts and circumstances of the case, the disallowance of Rs. 10, 14,84,350/- made by the AO in terms of Rule 8D; without recording cogent satisfaction pointing out the incorrectness in the disallowance of Rs. 3,46,20,191/- suo moto offered by the assessee was in gross violation of the provisions of Section 14A(2) read with Rule 8D(1) and in that view of the matter the impugned disallowance made by the AO be held to be bad in law and accordingly deleted. 3.For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before." 5.We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 6.The assessee in this case has made a suo moto disallowance of expenditure of Rs. 3,46,20,191/-, in its computation u/s 14A of the Act. The Assessing Officer at page 2 of his order observed as follows:- "However, on examination it was found that the calculation has not been done in accordance with Sec. 14A read with rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. For this proposition, he relies on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Ashish Jhunjhunwala in ITAT No. 157 of 2013, judgment dt. 08/01/2014. 6.3. The ld. D/R submits that, there is no fixed format or mode suggested in the statute requiring the Assessing Officer to express is satisfaction or otherwise of the suo moto disallowance made by the assessee, prior to invoking Rule 8D of the Rules. It was submitted that the Assessing Officer was not satisfied and hence raised a query and thereafter considered the explanation and expressed his dissatisfaction for the same. Both the parties have relied on a number of case-law in support of the same. 6.4. On consideration of these submissions, we are of the considered opinion that the Assessing Officer has recorded that he is not satisfied with the explanation given by the assessee on the suo moto disallowance. The assessee has also not given any working to justify the suo moto disallowance. He made certain claims without supporting the same with figures. Under these circumstances, we are of the considered opinion that the Assessing Officer has recorded satisfaction, that he is unable to accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in computing the book profit assessable u/ s 115 JB of the Act. 2.For that on the facts and in the circumstances of the case, the appellant having netted off the provision for "Diminution in Value of Investments" against the cost of investments and having disclosed the cost of investments in the audited Balance Sheet; net-off such provision the AO, was unjustified in making the addition of the said amount in arriving at the book profit assessed u/ s 115 JB of the Act. 3.For that on the facts and in the circumstances of the case, the AO be directed to exclude from the "book profit" assessed u/s 115JB; the sum of Rs. 13,97,75,000/-. 4.For that the appellant craves leave to file additional grounds and/or amend or alter the grounds already taken either before or at the time of hearing of the appeal." 16.After hearing rival contentions, we find that the assessee has recorded to its profit and loss account, diminution in the value of investments. It was submitted that that net costs of investments was reflected in the profit and loss account and under those circumstances, this figure cannot be adjusted once again while computing book profits assessed u/s 115JB of the Act. Relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the value of any asset would not fall within item (c) of Explanation (i). It is in that context the appellate Commissioner as well as the Tribunal has granted relief to the assessee. Realising the fatality of the said argument, it is contended now that item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, in case of the assessee falls under Item (c). In meeting the aforesaid case, the learned counsel for the assessee brought to our notice the judgment of the Apex Court in the case of Vijaya Bank ( supra) where the Apex Court had an occasion to consider his explanation. It accepted the argument on behalf of the Revenue to the effect that the explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under Section 36(1)(vii) of the 1961 Act by' merely deb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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