TMI Blog2020 (8) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... y dated 18.12.2012. AO considered the explanation offered by the assessee vide letter dated 18.12.2012 and recorded his satisfaction as to how the disallowance voluntarily made by the assessee was not acceptable. Hence, we find that the Assessing Officer had rightly followed the procedure under Section 14A(2) of the Act and only thereafter, recorded his dis-satisfaction on the correctness of the claim made by the assessee and having regard to the accounts of the assessee, proceeded to follow the procedure under Rule 8D of the Rules. There is full compliance of what is required to be done by the Assessing Officer as pointed out in the case of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT ] - For the above reasons, we hold that the assessee has not made out a case for interference in the order passed by the Tribunal. - Decided in favour of revenue. - Tax Case Appeal No. 431 of 2018 - - - Dated:- 22-7-2020 - Mr. Justice T.S. Sivagnanam And Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Ms.Sri Niranjani Mr.G.Baskar For the Respondent : Mr.Karthik Ranganathan, SSC, Assisted by Mr.S.Rajesh, JSC JUDGMENT T.S.SIVAGNANAM,J We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance under Section 14A of the Act. Therefore, a show cause notice was issued to the assessee calling upon them to explain as to why Rule 8D of the Rules should not be invoked to compute the expense attributable for earning exempt income. The assessee, vide letter dated 18.12.2012, stated that the dividend income was earned from investments in mutual funds, which were made from the surplus funds available with the company, that only salary cost of personnel involved in buying and selling of mutual funds amounting to ₹ 1,44,000/- was incurred for earning such dividend income and that therefore, the same was disallowed under Section 14A of the Act. 7. The Assessing Officer was not convinced with the explanation offered by the assessee and held that a portion of managerial remuneration and directors remuneration should also be attributed towards the dividend earning activity by the assessee. Accordingly, Rule 8D of the Rules was pressed into service and a disallowance of ₹ 52,72,554/- was made. 8. Aggrieved by the order of assessment dated 27.3.2013, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-9, Chennai-34 [hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at on the basis of the accounts submitted by the assessee. It is also submitted that in the instant case, all that the Assessing Officer had done is a guess work and he did not record a conclusion as to why he was not satisfied with the disallowance offered by the assessee. 13. In support of their contention, the learned counsel for the assessee have relied upon the decisions (i) of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT, New Delhi [reported in (2018) 402 ITR 640]; (ii) of the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT [reported in (2017) 81 Taxmann.com 111]; (iii) of the Bombay High Court in the case of PCIT-3, Mumbai Vs. Reliance Capital Asset Management Ltd. [reported in (2018) 400 ITR 217]; and (iv) of the Bombay High Court in the case of PCIT-2 Vs. Bombay Stock Exchange Ltd. [reported in (2020) 113 Taxmann. Com 303]. 14. Therefore, it is submitted by both the learned counsel for the assessee that concurrently all the three authorities erroneously applied the provisions of Rule 8D of the Rules without recording satisfaction, which is mandated under Section 14A(2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of its accounts. Further, what we will have to examine is the factual position. 19. As noticed above, the assessee was issued a show cause notice calling upon them to explain as to why the provisions of Rule 8D of the Rules should not be invoked to compute the expenses attributable for earning exempt income. While issuing the show cause notice, the Assessing Officer, prima facie, recorded his dis-satisfaction, which is evident from a reading of the assessment order wherein the Assessing Officer stated that he was not satisfied with the quantum of expenses claimed by the assessee as attributable for earning exempt income. 20. In other words, issuance of show cause notice calling upon the assessee to explain pre-supposes a prima facie opinion formed by the Assessing Officer with regard to the accounts of the assessee. Therefore, once a show cause notice is issued, the assessee is informed about the prima facie view of the Assessing Officer. However, the Assessing Officer cannot have a closed mind while issuing a show cause notice. The assessee rightly understood the prima facie opinion formed by the Assessing Officer with regard to the expenses claimed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintain such investment portfolio and that the quantum of expenditure computed by the assessee was not acceptable. Further, the Assessing Officer examined the materials placed before him and pointed out that the assessee incurred routine expenditure to maintain its establishment and towards administration, a portion of which could be attributed towards the activity of earning of dividend. 23. The Assessing Officer noted that the assessee also incurred managerial remuneration and claimed whole of the same as an expenditure. Therefore, he concluded that a portion of the managerial remuneration and directors remuneration should also be attributed towards dividend earning activity by the assessee. Thus, in our considered view, the Assessing Officer recorded his satisfaction having regard to the accounts of the assessee. 24. Obviously, we cannot expect the Assessing Officer to write a judgment. The correctness of the findings of the Assessing Officer was tested by the CIT(A). The assessee argued that the mutual funds were entirely managed by the fund managers, that only a minimum management was required by the investor and that the assessee made a rational estimate of time spen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ACIT-10(1) Vs. Citi Corp Finance (India) Ltd. [ITA.No.5832/Mum/2003 (AY 2000-01) dated 27.11.2006]. With these reasons, the CIT(A) affirmed the view taken by the Assessing Officer. 27. The assessee, in their cross objections filed before the Tribunal, reiterated their earlier stand that the Assessing Officer nowhere recorded satisfaction and that the disallowance made was not sufficient. 28. The correctness of such a stand was independently tested by the Tribunal. We find from the impugned order that the assessee filed a calculation sheet as to how they computed ₹ 1,44,000/-. After referring to the same, the Tribunal pointed out that there was nothing available on record to show as to how the assessee estimated the time spent per day by a senior manager as five minutes and manager as fifteen minutes for managing to the tune of ₹ 1,32,39,84,480/-. The Tribunal noted that the salary cost mentioned in the tabulated statement was only an approximation without any scientific basis. Further, noting the decision in the case of Godrej Boyce Manufacturing Company Ltd., the Tribunal held that the Assessing Officer recorded satisfaction. 29. As mentioned ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
