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TMI Blog2021 (12) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... rap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB, considering the similarity in language used in sections 80HH and 80IB of the Act, we are of the considered opinion that the assessee should succeed in this regard also. - ITA No. 479/PUN/2021 - - - Dated:- 16-12-2021 - Shri Inturi Rama Rao, Accountant Member And Shri Partha Sarathi Chaudhury, Judicial Member For the Revenue : Shri Sunil Kumar For the Assessee : Shri Jayant Pendse ORDER PER PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the Revenue emanates from the order of the Ld. CIT(Appeal), Pune -13 dated 29.04.2021 for the assessment year 2016-17 as per the following grounds of appeal on record: 1. The CIT(A) erred on both on facts and in law in passing the order. 2. The CIT(A) erred in deleting the disallowance made u/s.14A of the Act by relying upon the decision of the Hon ble ITAT, Pune wherein the Hon ble Tribunal held that no satisfaction has been recorded by the Assessing Officer as per requirement of Rule 8D. 3. The Ld. CIT(A) erred by relying upon the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the assessee company had received dividend income of ₹ 8,52,96,816/-. The entire dividend income has been claimed by the assessee company as exempt under section 10(34) of the Act. In this regard, the assessee was asked to submit working under section 14A of the Act read with Rule 8D. Further, the assessee has furnished the details called for. On verification of the detail of disallowances, it was seen that the assessee had made suo moto disallowance of ₹ 5,34,763/- as against the exempt income of ₹ 1,19,31,040/- while computing taxable income. Thus, the Assessing Officer was not satisfied with the correctness of the claim of the assessee. The submission of the assessee was duly considered but not found to be acceptable to the Assessing Officer. The Assessing Officer therefore, held that in principle for the reasons that any expenditure incurred for earning the income which cannot become part of the total income cannot be allowed while computing the income of the assessee company. In view of the above, the Assessing Officer disallowed an amount of ₹ 1,13,96,277/- u/s.14A r.w.r.8D and added the same to its total income. 5. That before the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2017 passed in ITA Nos.327 to 330/PUN/2016, the Tribunal decided the said issue in favour of assessee deleting 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 vide paragraph Nos.5 to 14 of its order, which read as under:- 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The solitary issue raised in all the appeals by the assessee is against confirming of disallowance u/s. 14A r.w. Rule 8D. It is an admitted fact that the assessee had made strategic investment in group concern. By virtue of such investment the assessee has earned dividend income. The assessee 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording of satisfaction by Assessing Officer to the effect that the claim made by assessee in respect of expenditure in relation to income which does not form part of the total income under the Act is correct or otherwise is one of the pre-conditions. Thus, the road to Rule 8D passes through sub-section (2) to section 14A of the Act. The satisfaction of Assessing Officer as to incorrect claim made by assessee is sine-qua-non for invoking the provisions of Rule 8D. Such satisfaction can be reached and recorded only when the claim of assessee is verified. 8. In the present case we observe that during the course of assessment, the Assessing Officer after considering the submissions of assessee proceeded on to working of disallowance u/s. 14A r.w. Rule 8D without commenting 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such disallowance. The Assessing Officer proceeded on the premise as if disallowance u/s. 14A r.w. Rule 8D is automatic irrespective of the genuineness of claim made by assessee. 12. The Hon ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. (supra) held that the Assessing Officer is required to record objective satisfaction for making disallowance of expenditure u/s. 14A. The relevant extract of the findings of Hon ble High Court reads as under : 5. It is undisputed position before us that for the subject assessment year. r. 8D of the Rules would be applicable in view of the decision of this 8 ITA Nos. 327 to 330/PUN/2016, A.Ys. 2008-09 to 2011-12 Court in Godrej . Boyce Mfg. Co. Ltd. vs. Dy. CIT (2010) 234 CTR (Born) 1: (2010) 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 satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by relying inter-alia, on the decision of the Hon ‟ ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Ultra Tech Cement Ltd. (supra) 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. The appeal of assessee for A.Y. 2012-13 is accordingly allowed. 12. This leaves us with the appeal of assessee for A.Y. 2014-15 being ITA No.1999/PUN/2017 which involves a solitary issue relating to the disallowance made by the Assessing Officer and confirmed by ld. CIT(A) u/s 14A of the Act read with rule 8D of the Rules which is similar to the one involved in assessee ‟ s appeal for A.Y. 2012-13, which has already been decided by us. Since all the material facts relating to the said issue as involved in A.Y. 2014-15 are similar to A.Y. 2012-13, we follow the conclusion drawn by us in A.Y.2012-13 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. The appeal of assessee for AY 2014-15 is accordingly allowed. 8. The Ld. DR fairly conceded that this issue is covered in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O observed that the scrap is not a bye product of the assessee and hence the sale of the same cannot be treated as the business income of the unit and hence not eligi9ble for deduction u/s 80-IB of the Act. As regards the alternative ground of the assessee of taking net income earned out of the sale of scrap, the A.O. observed that the same is not acceptable as the cost relating to the sale of scrap was already debited to the P L a/c of the unit. The A.O also did not grant deduction u/s 80-IB in respect of miscellaneous income amounting to ₹ 56,32,480/- relying on the judgments of Apex Court in the case of Pandian Chemicals (233 ITR 497) and Sterling Foods Ltd. (236 AITR 529). On appeal, the CIT(A) has confirmed the view taken by the A.O on this issue. 28. At the very outset, the Learned Counsel for the assessee has mentioned that the said issue is also covered in favour of the assessee by virtue of .Madras High Court judgment in the case of M/s Fenner India Ltd (241 ITR 803) for the proposition that the profit on sale of scrap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB, Considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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