TMI Blog2014 (12) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... method of apportionment - CIT (A) ought to have not deleted the disallowance in Toto, rather ought to have examined whether any disallowance is possible or not - she should have examined whether any expenditure attributable to earning exempt income can be identified for disallowance u/s 14A of the Act - the order of the CIT (A) is not sustainable – thus, the order is set aside and the matter is remitted back to the AO for re-adjudication. CIT in an order u/s 263 had made a clear direction that the amount disallowed u/s 14A would be adjusted in the book profit - if any disallowance is being made by the AO, in the regular course of assessment, then that disallowance would be included in the book profit, to be computed for the purpose of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the CIT (A). The appeal has been decided by the learned CIT (A) vide order dated 7.10.2013, impugned herein in ITA No.84/Bang/2014. Simultaneously, the learned Commissioner felt that as per Explanation-1, clause (f) to section 115JB, the Assessing Officer ought to have computed the book profit after including the disallowance made u/s 14A. Thus, according to the learned Commissioner, the assessment order is erroneous and prejudicial to the interests of the Revenue. She took action u/s 263 of the Income Tax Act and set aside the assessment order vide her order dated 28.02.2011. The direction given by the learned Commissioner in Paragraph Nos. 8 9 read as under: 8. To sum up, the assessment order dated 29.12.2008 passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as per the provisions of Income Tax Act, 1961. 3. The Assessing Officer has passed consequential order on 21.01.2013. This order was challenged by the assessee in appeal before the CIT (A) and the learned CIT (A) has decided the appeal on 9.10.2013 which is impugned herein in ITA No.85/Bang/2014. 4. The learned CIT (A) in the appeal against the assessment order dated 29.12.2008 has held that the Assessing Officer has computed the disallowance u/s 14A read with Rule 8D of the Income Tax Act. The Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT (328 ITR 81) and the Hon'ble Delhi High Court in the case of Maxopp Investments Ltd. Vs CIT reported in 347 ITR 272 (Del.) have held that Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or not. In other words, she should have examined whether any expenditure attributable to earning exempt income can be identified for disallowance u/s 14A of the Act. She has simply observed that Rule 8D is not applicable, therefore, addition by the Assessing Officer is deleted. The observations of the Hon'ble Delhi High Court in the case of Maxopp Investments Ltd. Vs CIT reported in 347 ITR 272 (Del.) is worth to note, it read as under: How is Section 14A to be worked for the period prior to the introduction of Rule 8D? 41. Sub-section (2) of section 14A, as we have seen, stipulates that the Assessing Officer shall determine the amount of expenditure incurred in relation to income which does not form part of the total income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the assessee is not correct, he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. It would be appropriate to recall the words of the Supreme Court in Walfort (supra) to the following effect:- The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A. So, even for the pre-Rule8D period, whenever the issue of section 14A arises before an Assessing Officer, he has, first of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2013 and restore this issue to the file of the Assessing Officer for re-adjudication. The Assessing Officer shall keep in mind the decision of the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd (Supra) or any other latest decision, if any, rendered by the Hon'ble jurisdictional High Court or of the Hon'ble Supreme Court on this point. 8. The learned Counsel for the assessee at this stage contended that expenditure u/s 14A may not at all be disallowed. He made reference to the decision of ITAT Mumbai in the case of Kodak India, reported in 36 CCH 048 Mumbai (Trib.) and of the ITAT Bangalore Bench in the case of Kingfisher Finvest India Ltd vs. Add. CIT in ITA No.1368/Bang/2012. On due consideration of these d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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