TMI Blog2018 (4) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... :- In the present case, the Assessing Officer has failed to record necessary satisfaction as to why suo moto disallowance made by the assessee was not correct and in the absence of the same and applying the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA) and in Maxopp Investment Ltd. Vs. CIT (2018 (3) TMI 805 - SUPREME COURT OF INDIA) we find no merit in the disallowance worked out by the Assessing Officer by invoking provisions of Rule 8D(iii) of the Rules. In the absence of recording of satisfaction under section 14A(2) of the Act, the action of Assessing Officer is not as per law and the same is reversed MAT computation - disallowance worked out under section 14A read with Rule 8D of the Rules not to be added - Held that:- We direct the Assessing Officer not to include the disallowance under section 14A of the Act read with Rule 8D of the Rules, if any, as part of book profits under section 115JB of the Act. - ITA No.594/PN/2015 - - - Dated:- 12-4-2018 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri Kishore Phadke For The Respondent : Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard the rival contentions and perused the record. The assessee was engaged in onsite and offsite software development. The assessee was providing software solutions and support services to its associated enterprises and in respect of same, no issue has been raised. However, in the TP proceedings, the Transfer Pricing Officer (TPO) also noted that the assessee had granted loans to its associated enterprises and had earned interest on the said loans granted. The loans were granted in foreign currency and were also repayable in foreign currency. Hence, the assessee contended that most appropriate rate comparison would be the rates prescribed by RBI for foreign currency deposits for residents of India. However, the TPO noted that similar adjustment has been made in earlier years and following the same reasoning, arm's length price computed by the assessee in respect of international transactions relating to provision of interest was found to be not acceptable. The TPO based on the rate of BPLR of State Bank of India applied the rate of 12.25% and worked out the adjustment at ₹ 74,38,465/-. Against the said adjustment, the Assessing Officer issued draft assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of assessee. The ground of appeal No.1 raised by the assessee is thus, allowed for statistical purposes. 10. The issue in ground of appeal No.2 raised by the assessee is against disallowance made under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short the Rules ). 11. Brief facts relating to the issue are that the assessee on its own motion suo moto disallowed ₹ 50,000/- as expenses relating to earning of exempt income under Rule 8D(iii) of the Rules. The Assessing Officer on the other hand, applied provisions of Rule 8D(iii) of the Rules and disallowed sum of ₹ 15,50,542/-. 12. The assessee is in appeal against the same on the ground that the Assessing Officer had failed to record satisfaction as required under section 14A(2) of the Act before making aforesaid disallowance. The learned Authorized Representative for the assessee in this regard, placed reliance on the ratio laid down by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Company Ltd. Vs. DCIT (2017) 81 taxmann.com 111 (SC) and in Maxopp Investment Ltd. Vs. CIT (2018) 91 taxmann.com 154 (SC). 13. The learned Departmental Representative for the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee i.e. ₹ 50 lakhs under section 14A of the Act is not correct. The Assessing Officer takes note of the disallowance, considers the explanation of assessee and holds that the contention of assessee cannot be accepted. The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT Anr. (2017) 394 ITR 449 (SC). 37. We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002-03. Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of appeal No.2 and since we have allowed the ground of appeal No.2, the alternate plea does not stand. 19. Now, coming to the issue raised vide ground of appeal No.4 i.e. while computing book profit under section 115JB of the Act, the disallowance worked out under section 14A of the Act read with Rule 8D of the Rules amounting to ₹ 15,50,542/- not to be added. 20. The learned Authorized Representative for the assessee pointed out that this issue was also decided by the Tribunal in assessee s own case in assessment years 2008-09 and 2009-10. 21. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 22. We have heard the rival contentions and perused the record. The issue of adjustment of book profit under section 115JB of the Act does not arise since we have already directed the Assessing Officer to delete disallowance made under section 14A of the Act read with Rule 8D(iii) of the Rules. In any case, even if the disallowance is to be upheld, the same is not to be added to the book profits under section 115JB of the Act. The Tribunal in assessee s own case has decided the issue as under:- 20. The next iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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