TMI Blog2017 (6) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Commissioner of Income Tax (A) - II, Pune, dt.28.05.2014 for the assessment year 2009-10. 2. The relevant facts as culled out from the material on record are as under :- 2.1 Assessee is a company stated to be running a Diagnostic Centre. Assessee electronically filed its return of income for A.Y. 2009-10 on 29.10.2009 declaring total income at ₹ 15,12,596/-. Subsequently, assessee filed revised return of income on 27.09.2010 declaring nil taxable income. The case was selected for scrutiny and total loss was determined at ₹ 1,70,18,310/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.28.05.2014 dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds: 1. The Ld.CIT(A) erred in confirming the disallowance u/s 14A of ₹ 1,46,964/-. 2. The Ld.CIT(A) failed to appreciate that the assessee had not incurred any expenditure to earn the exempt income and in the absence of any proper satisfaction recorded by the learned AO no disallowance u/s 14A r.w.r 8D could be made in the hands of the assessee. Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the appellant in the profit loss account either direct or indirect restricted the said disallowance u/s 14A r . w . Rule 8D(2)(iii) as worked out and submitted by the appellant . The Hon'ble Bombay High Court in the case of Godrej Boyce, 328 ITR 81 (Bom) authorizes the Assessing Officer to re-compute the disallowance u/s 14A as per prescribed method u/r 8D in case he is not satisfied with the claim of the assessee having regard to its accounts . The said principle has also been upheld by ITAT Madras in the case of Siva Industries Holding Ltd Vs ACIT in its order dated 20-05-2011, ITA No 2148/Mds/2010 and also by the Delhi Tribunal in DCIT Vs Jindal Photo Ltd lTA No 814/De1/2011 dated 23-09-2011 . The fact on record clearly indicate the appellant to be in receipt of exempt income in the form of dividend from the investments made of Rs . 2 . 72 crores during the year under consideration. Thus, prima facie the disallowance made by the Assessing Officer has been rightly done u/s 14A r . w . Rule 8D(2)(iii) . There cannot be any income without any kind of expenses or labour however small it can be and , therefore , the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice r to , on an examination of the assessee ' s claim to either accept the same or state his reasons for his dissatisfaction therewith against with reference to the accounts . Apart from being the requirement of law it is only in such case that the validity of the dissatisfaction of the Assessing Officer , on an appeal by the assessee could be examined and reviewed by an appellate autho r ity . T h e Assessing Officer in any case has considered the disallowance as is apparent from the amount disallowed under Rule 8D(2)(iii) only and no disallowance has been considered under the other clauses of Rule 8D . Further it is relevant to point out that the appellant had himself worked out the disallowance u/s 14A u/r 8D during the course of assessment proceedings which the Assesisng Officer found to be in order and accordingly considered this amount for disallowance. In this regard the decision of the Chennai ITAT in the case of DCIT Vs. Vintros and Co (2013) 141 ITD 626 becomes relevant wherein the assessee earned exempt dividend income. When the Assessing Officer found to be in order and accordingly considered this amount of disallowance. In this regard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Limited in [2014] 46 taxmann.com 284 (Pune). He placed on record the copy of the aforesaid decision. He therefore submitted that the disallowance made u/s 14A and confirmed by Ld.CIT(A) be deleted. Ld.D.R. on the other hand, supported the order of AO and Ld.CIT(A). 6. We have heard both the parties and perused the material on record. The issue in the present case is with respect to disallowance of expenses u/s 14A of the Act. It is seen that the disallowance of ₹ 1,46,964/- has been worked out u/s 14A r.w.r. 8D(2), being 0.5% of average investments and no disallowance of account of interest has been worked out. We find that AO while proceeding with disallowing the expenses has not recorded any satisfaction as required u/s 14A(2) of the Act. As per Sec.14A(2), for invocation of Rule 8D, the AO has to record satisfaction about the correctness of the claim of the assessee, in respect of the expenditure incurred in relation to the income which does not form part of total income. In the present case, we find that no satisfaction has been recorded by the AO while disallowing the expense u/s 14A of the Act. On the issue of necessity of recording of satisfaction while dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim in respect of the expenditure in relation to the income which does not form part of the total income under the Act or if he is not satisfied with the correctness of the assessee s claim that no expenditure has been incurred by him in relation to such income. The Hon ble High Court further observed as under 18. The next question is as to whether it is necessary for the Assessing Officer to record his reasons for not being satisfied with the correctness of the assessee's claim. 19. It is mandatory for the Assessing Officer to record that having regard to the accounts of the assessee he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act or that he is not satisfied with the assessee's claim that no expenditure had been incurred by him in relation to the income which does not form part of the total income under the Act. 20. The matter stands concluded by a judgment of this court dated January 27, 2015 in CIT Vs. Abhishek Industries Ltd. I T A. No. 320 of 2013- reported in [2016] 380 I1R 652 (P H), where the Division Bench hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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