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TMI Blog2020 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... dictional High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. [ 2017 (2) TMI 1005 - BOMBAY HIGH COURT] and delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) u/s 14A of the Act read with Rule 8D of the Rules. - Decided in favour of assessee. - ITA No.2256/PUN/2017, ITA Nos.1998 & 1999/PUN/2017 - - - Dated:- 2-12-2020 - Shri P.M. Jagtap, Vice President (K/Z) And Shri Partha Sarathi Chaudhury, Judicial Member For the Assessee : Shri J.G. Pendse For the Revenue : Shri S.P. Walimbe ORDER PER P.M. JAGTAP, VP : Out of these three appeals, two appeals being ITA Nos.2256/PUN/2017 (Revenue‟s Appeal) and ITA No.1998/PUN/2017 (Assessee‟s appeal) are cross appeals for A.Y. 2012-13 while third appeal being ITA No.1999/PUN/2017 is the appeal filed by the assessee for A.Y. 2014-15. Since all these three appeals are directed against a common order of CIT(A), Pune-11, dated 27.07.2017 and involve some common issue, the same have been heard together and are being disposed of by a single consolidated order. 2. First, we take up the appeal of Revenue for A.Y. 2012-13 being ITA No.2256/PUN/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB of the Act in respect of sale of scrap was allowed by the Tribunal. Keeping in view that the provisions of section 80IC of the Act are analogous to the provisions of section 80IB of the Act, the ld. CIT(A) followed the decision of Tribunal rendered in assessee‟s own case for A.Ys. 2002-03, 2003-04 and 2004-05 and directed the Assessing Officer to allow the claim of assessee for deduction u/s 80IC of the Act in respect of sale of scrap for A.Y. 2012-13. Aggrieved by this relief allowed by the ld. CIT(A) to the assessee, the Revenue has preferred this appeal before the Tribunal. 5. We have heard the arguments of both sides and perused the material available on record. As agreed by the ld. Authorized Representatives of both sides, the solitary issue involved in the appeal of the Revenue for A.Y. 2012-13 relating to the assessee‟s claim for deduction u/s 80IC of the Act in respect of sale of scrap is squarely covered in favour of the assessee by various decisions of Tribunal rendered in assessee‟s own case including the latest decision of the Tribunal rendered for A.Y. 2014-15 vide its order dated 27.01.2020 passed in ITA No.2257/PUN/2017, wherein similar clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee company. In this regard, it was explained on behalf of the assessee company that the entire investment in shares was made out of its own funds available in the form of share capital and free reserves and there being no utilization of interest bearing borrowed funds for making the said investment, no disallowance on account of interest expenditure u/s 14A of the Act was called for. It was also explained on behalf of the assessee company that out of total investment of ₹ 12.52 crores made in the shares, investment to the extent of ₹ 12.60 crores was made in the shares of one sister concern company viz. Finolex Industries Limited and since the said investment in shares was held in Dmat format and dividend income was directly credited to the bank account by the concerned company, hardly any efforts were required to be made or expenses were required to be incurred for maintaining the portfolio of investment in shares and earning the dividend income. This explanation offered on behalf of the assessee company was not found acceptable by the Assessing Officer and applying rule 8D of the Rules, he worked out the expenses incurred by the assessee in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has made suo-moto disallowance u/s. 14A in all the assessment years under appeal, however, the Assessing Officer in assessment proceedings enhanced the disallowance by invoking the provisions of Rule 8D. The details of exempt income received, suo-moto disallowance made by assessee and disallowance u/s. 14A r.w. Rule 8D made by Assessing Officer are as under : Assessment Year Total Dividend income received, claimed as exempt (in Rs.) Suo-motu disallowance by assessee (in Rs.) Disallowance u/s. 14A applying Rule 8D by AO (in Rs.) 2008-09 13,72,45,640/- 2,55,400/- 1,17,74,029/- 2009-10 12,51,22,953/- 3,02,550/- 1,61,02,610/- 2010-11 4,24,98,032/- 4,43,316/- 1,01,86,592/- 2011-12 13,56,23,646/- 5,28,048/- 1,18,34,013/- 6. The Assessing Officer made disallowance u/s. 14A by invokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or recording satisfaction qua suo-moto disallowance made by assessee. The right course of action for the Assessing Officer is to first examine correctness of assessee s claim of disallowance made u/s. 14A. If the Assessing Officer is not satisfied with the correctness of the claim made by assessee, the Assessing Officer after recording objective satisfaction should have invoked the provisions of Rule 8D. In the instant case the Assessing Officer has not deliberated in his order as to what was the disallowance made by assessee, and as to why the disallowance made by assessee is incorrect. The Assessing Officer directly proceeded on to compute disallowance under Rule 8D without even taking note of suo-moto disallowance made by the assessee. 9. In First Appellate Proceedings the assessee raised the objections before Commissioner of Income Tax (Appeals) qua non-compliance of provisions of sub-section (2) of section 14A. The Commissioner of Income Tax (Appeals) rejected the contentions of assessee by observing as under : 5.7. ..The fact that the appellant had considered certain amount as disallowable does not come out from the appellant s submissions reproduced in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010) 43 DTR (Bom) 177: (2010) 328 ITR 81 (Bom). However, we further note that the non-satisfaction of the AO with regard to the disallowance of expenditure done by the respondent-assessee has to be an objective satisfaction which entails recording of reasons as held by this Court in Godrej and Boyce (supra) in para 55 while recording summation of its conclusion as under: (ix) The satisfaction envisaged by sub-s. (2) of s. 14A is an objective satisfaction that has to be arrived at by the AO having regard to the accounts of the assessee. The safeguard introduced by sub-so (2) of s. 14A for a fair and reasonable exercise of power by the AO, conditioned as it is by the requirement of an objective satisfaction, must, therefore, be scrupulously observed. An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his accounts and recording of reasons by the AO in the event that he comes to the conclusion that he is not satisfied with the claim of the assessee: 6. Thus no fault can be found with the impugned order of the Tribunal holding that the AO should show fallacies in the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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