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M/s Bombay Stock Exchange, Ltd Versus Addl. Commissioner of Income Tax RG 2 (1) , Mumbai

2016 (7) TMI 378 - ITAT MUMBAI

Disallowance u/s 14A - Held that:- As no such satisfaction recorded by the AO for rejecting the disallowance claimed by the assessee and correctness of the same. We find that this issue now stands covered in favour of the assessee and against the revenue by the Tribunal decision in assessee’s own case for the assessment year 2006-07 and even otherwise on the issue of satisfaction, the Hon’ble Kolkata Bench of the Tribunal in the case of REI Agro Ltd. v. Deputy Commissioner of Income-tax, Central .....

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the case that there is no satisfaction recorded by the AO about the correctness of the accounts of the assessee for making disallowance u/s 14A of the Act, no further disallowance can be made by the AO. - Decided in favour of assessee - Non granting the TDS credit - Held that:- AO has disallowed the claim of the credit for TDS amounting to ₹ 11,95,766/- and credit for TDS as not claimed by the assessee amounting to ₹ 26,10,633/- for the reasons that the TDS certificate were recei .....

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ssessee has filed rectification petition before him and even the CIT(A) has directed the AO to allow claim of TDS after verifying the same. We direct the AO to allow the claim of TDS amounting to ₹ 11,95,766/- which were filed before him during the course of assessment proceedings and also the TDS certificate received late but filed before him along with the rectification letter dated 24.12.2009 amounting to ₹ 26,10,633/-. We direct the AO to give credit of this TDS amount and decide .....

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HRI MAHAVIR SINGH, JM AND SHRI RAJESH KUMAR, AM For The Assessee : Shri Niraj Sheth For The Revenue : Shri Sanjeev Jain ORDER PER BENCH: These are three appeals under consideration. These three appeals are directed against the three separate orders of CIT(A) dated 20.9.2010, 5.12.2012 and 25.4.2012 for the assessment years 2007-08 to 2009-10 respectively. Since, these appeals pertain to the same assessee, therefore, for the sake of convenience; they are clubbed together, heard together and dispo .....

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to the issue are that the assessee has exempt income in the form of dividend from various investments amounting to ₹ 68.46 crores. The assessee itself computed the disallowance of direct and indirect expenditures after allocating the sum of ₹ 28,28,638/- qua exempt income. The computation /details of working of disallowance made by the assessee itself is provided in para 5.2 at page 4 of the assessment order. The AO has invoked the provisions of section 14A of the Act r.w.r 8D of th .....

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5. I find that the A.O., while computing the disallowance under Rule 8D has taken a sum of ₹ 11,56,498/- as the direct expenses under Rule 80 as offered by the assessee. However, under Rule 8D(2)(ii) the A.O. has computed the disallowance in respect of interest not directly attributable to exempted income as "NIL". The only disallowance made by the A.O. is 0.5% of the average investment which works out to ₹ 6,82,00,000/ -. As explained above I am of the considered view that .....

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on the issue of non-recording of satisfaction and also on merits by observing as under : 2. 7. We have considered the submissions of the parties, perused the orders of the authorities below and the material available on record. As far as application of rule 8D is concerned, at the outset, it is to be held that in view of the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. (supra) and of Hon'ble Delhi High Court in Maxopp Investment Ltd. (supra), sai .....

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he Assessing Officer has to apply it after complying to the condition of section 14A(2). Therefore, at this stage, it is necessary to examine whether the Assessing Officer while assuming jurisdiction under section 14A, has recorded his satisfaction regarding correctness of assessee s claim having regard to its books of account. Though, the learned Departmental Representative has raised a preliminary objection against taking up this issue, but, we do not find such objection acceptable for the fol .....

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he assessee that in terms with section 14A(2), the Assessing Officer must record a satisfaction that claim of expenditure by the assessee with reference to its books of account for earning exempt income is not correct. Though, recording of satisfaction as provided in sub-section (2) was brought to statute by Finance Act, 2006, w.e.f. 1st April 2007, and applicable for assessment year 2007-08, but, as held by Hon'ble Delhi High Court, in Maxopp Investment Ltd. (supra), even prior to introduct .....

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disallowance under section 14A, simply for the reason that it is not in terms with the method prescribed under rule 8D. In view of the aforesaid, we have no hesitation in holding that satisfaction recorded by Assessing Officer with regard to correctness of assessee s claim is without valid reasons. Now, coming to the merits of the disallowance worked out by the assessee as well as the Assessing Officer, it is observed that the assessee has worked out the disallowance by taking into consideration .....

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erned, it is noticed that the Assessing Officer has no dispute with regard to direct expenses as he has accepted the amount worked out by the assessee. Only in respect of indirect expenses, the Assessing Officer has applied rule 8D(2)(iii) by making disallowance of 0.5% of the total average investment. In our view, the disallowance of indirect expenses made by the Assessing Officer cannot survive firstly because rule 8D(2)(iii) is not applicable for the impugned assessment and secondly, when the .....

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her cases. A reference in this regard can be had to the decision of the Tribunal, Mumbai Bench, in Voltas Ltd. (supra). In view of the aforesaid, we do not see any reason to uphold the disallowance of indirect expenses made by the Assessing Officer by applying a provisions of rule 8D(2)(iii). However, there is no dispute to the fact that the assessee did incur certain expenses towards earning the exempt income. In fact, the assessee has also accepted this factual position and has submitted a wor .....

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the disallowance made by the assessee under section 14A amounting to ₹ 15,95,064, is reasonable. We, therefore, direct the Assessing Officer to restrict the disallowance to that amount. In view of our decision as above, the issue raised by the assessee in ground no.2(iii) becomes redundant. Grounds are partly allowed. 5. The ld. Counsel for the assessee, in view of the above facts, stated that in the present year also there is no satisfaction recorded by the AO for the reasons that the as .....

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ecorded satisfaction in this year. The Ld.Sr.DR took us through on the same para 5.2 and 5.3 as referred by the ld. AR also, but we find that there is no such satisfaction recorded by the AO for rejecting the disallowance claimed by the assessee and correctness of the same. We find that this issue now stands covered in favour of the assessee and against the revenue by the Tribunal decision in assessee s own case for the assessment year 2006-07 (supra), and even otherwise on the issue of satisfac .....

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.3.2013. Even otherwise Rule 8D will not apply for the relevant assessment i.e. assessment year 2007-08, the year under consideration as held by Hon ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. 328 ITR 81. In view of the facts and circumstances of the case that there is no satisfaction recorded by the AO about the correctness of the accounts of the assessee for making disallowance u/s 14A of the Act, no further disallowance can be made by the AO. Accordingly, we .....

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laimed by the assessee amounting to ₹ 26,10,633/- for the reasons that the TDS certificate were received after filing the return of income. The assessee has filed a copy of rectification letter dated 24.12.2009 addressed to the AO stating that the original TDS certificate mentioning amount of ₹ 26,10,633/- were filed with the AO and also details of TDS claimed for an amount of ₹ 11,95,766/- were filed during the course of hearing before the AO vide letter dated 13.11.2009. In v .....

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24.12.2009 amounting to ₹ 26,10,633/-. We direct the AO to give credit of this TDS amount and decide the claim immediately. Now coming to appeals Nos.ITA 4408/M/2012 and ITA NO.1836/M/2013. 9. The next common issue in these appeals of the assessee is against the order of the CIT(A) confirming the disallowance made by the AO in respect of expenditure claimed qua exempt income by invoking the provisions of section 14A of the Act r.w.r.8D of the Rules amounting to ₹ 7,02,06,780/- and & .....

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of ₹ 34,70,979/- The relevant detailed working as given to the AO by assessee, is being reproduced by the AO in para 5.2 at pages 3 and 4 of the assessment order. As pointed out by the ld.AR that there is no satisfaction recorded by the AO in assessment year 2008-09 and 2009-10 and the facts on the issue are exactly identical to that of assessment years 2006-07 and 2007-08. We have gone through the assessment orders for both the assessment years and it is seen that it is exactly identical .....

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ew, this issue in these two years of assessee s appeals is allowed. 11. The next common issue in these appeals of assessee is with regard to not giving credit of TDS amount of ₹ 30,31,369/- and ₹ 5,44,05,867/- for the assessment years 2008-09 and 2009-10 respectively and advance tax credit of ₹ 1,70,00,000/-. 12. At the outset, the ld. Counsel of the assessee stated that now short credit for TDS is to the extent of ₹ 18,55,481/- and advance tax credit is amounting to S .....

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