TMI Blog2017 (10) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... hink that the working by the Tribunal or the determination of the disallowance at ₹ 3,50,000/ does not meet the ends of justice. It is restricted bearing in mind the facts and peculiar to the assessee's case. Partly the assessee's arguments have been accepted and the appeal allowed by setting aside the order of the Assessing Officer and that of the Commissioner of Income Tax (Appeals). We do not think that the question proposed by Mr. Suresh Kumar is a substantial question of law. - INCOME TAX APPEAL NO. 487 OF 2015 - - - Dated:- 19-9-2017 - S.C. DHARMADHIKARI PRAKASH D. NAIK, JJ. Mr. Suresh Kumar with Ms. Samiksha Kanani for the Appellant. Mr. R. Murlidhar with Mr. Rajesh Shah i/by M/s. Rajesh Shah Co. for the Respondent. ORAL ORDER ( Per Shri S.C. DHARMADHIKARI, J. ): 1. By this appeal, the Revenue questions the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai, dated 17 10 2014. 2. The Bench had before it two appeals of the assessee for the Assessment Years 2007 08 and 2008 09 being Income Tax Appeal Nos.8625 of 2010 and 4459 of 2012. 3. There was also an Income Tax Appeal No.4795 of 2012 by the Revenue for the Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance under Section 14A should be worked out as per the provisions of Rule 8D of the Income Tax Rules, 1962 ( the Rules for short). The Assessing Officer has accepted that there was no requirement of making any disallowance out of interest expenditure. However, he disallowed part of indirect expenses calculated at 0.5% of the average value of investments, which worked out to ₹ 1,46,78,090/ . This was in terms of Rule 8D and accordingly, the Assessing Officer enhanced the disallowance made by the assessee to the above figure. 11. The assessee approached the Commissioner of Income Tax (Appeals) and argued that it had substantiated the reasonableness of the working of expenses in para 2.5 of its submission dated 19 3 2010 (to the extent of ₹ 1,25,605/ ). There are 27 entries of dividends. All are by way of credit and no receipts are by cheque. Eight receipts are by way of direct credit and balance 19 entries were received in the form of dividend reinvestment. The total number of entries in the nature of transactions in respect of long term capital gains (STT) paid are four in number. It is in these circumstances, the assessee submitted that the working of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed. However, Mr. Murlidhar submits that this is conditional upon the satisfaction of the Assessing Officer. If the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure which is incurred and in terms of Section 14A, then alone he can fall back on the said sub rules and apply Rule 8D. Mr. Murlidhar invites our attention to the order of the Assessing Officer and particularly his conclusion that the assessee disputes the quantum of disallowance and once Section 14A is attracted, the disallowance is to be made as per Rule 8D only which has been prescribed by the Legislature. 15. Mr. Murlidhar would submit that this understanding of the Assessing Officer was totally incorrect. The position is that he has to be dissatisfied with the correctness of the claim of the assessee having regard to the assessee's account. Even the Commissioner of Income Tax (Appeals) has found that the Assessing Officer has not specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to income which does not form part of the total income under this Act. 19. The Assessing Officer did not specifically record that he is not satisfied with the correctness of the claim of the assessee in respect of the expenditure in relation to the income which does not form part of the total income under the Act. However, he felt obliged and going by the presence of Rule 8D that once Section 14A is attracted, the disallowance is to be made as per Rule 8D only which has been prescribed by the Legislature. The Assessing Officer has not adverted to the plain language of sub section (2) of Section 14A. 20. It is that mistake committed by the Assessing Officer which was partially corrected by the First Appellate Authority. The First Appellate Authority agreed with the assessee that the Assessing Officer has not commented upon the correctness or otherwise of the appellant's working of the claim. He has not specifically rejected that working and has not provided any reason for doing so. The Commissioner was of the view that before proceeding to compute the disallowance under Section 14A as per Rule 8D, the Assessing Officer should consider the working of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal completely. In the peculiar facts and circumstances of the assessee's case and the nature of its investments made, the Tribunal concluded that the disallowance worked out by the assessee should have been accepted. However, it did not accept the figure of disallowance worked out by the assessee. That although the Tribunal, in one line or sentence in para 8, says that the disallowance to be made under Rule 8D is determined at ₹ 3,50,000/ , we are not in agreement with Mr. Suresh Kumar that the Tribunal has accepted the applicability of this Rule/sub- rule/clause. This one sentence or one line cannot be read in isolation and out of context. Once the formula prescribed in Rule 8D(2)(iii) of the Rules could not have been applied is the essential conclusion, then, merely because the Tribunal did not accept the working of disallowance by the assessee in its entirety, does not mean that the appeal raises a substantial question of law. We do not think that the Tribunal's exercise can be termed as totally erroneous or illegal. It is neither perverse. The Tribunal's order cannot be said to be vitiated by an error of law apparent on the face of the record. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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