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TMI Blog2020 (7) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal 'D' Bench, Chennai, in ITA Nos.691 & 692/MDS/2017 dated 12.07.2017, for the Assessment Years 2011-12 and 2012-13. 2. The Tax Case Appeals were admitted on 21.06.2019 on the following Substantial Questions of Law. "1. Whether the Tribunal was right in holding that the strategic investments of the assessee capable of fetching exempt income do not attract disallowance u/s 14A even though the Section 14A read with Rule 8D does not differentiate the investments as strategic or nonstrategic? 2. Whether the Tribunal was right in observing that the Assessment Officer has not satisfied the mandatory requirement of Section 14A(2)?" 3. The question to be decided in this case is as to whether the tribunal was right in coming to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced to the said extent. 7. For the assessment year 2012-13, the tribunal holds that the Assessing Officer had not called for any specific explanation with regard to the fresh investment of Rs. 20 Crores, which are also capable of earning dividend income. Considering these facts, the tribunal directed the assessee to work out the expenditure component towards administrative and managerial aspect, so that the same shall be disallowed in the computation of income of the assessee. Accordingly, the appeal filed by the assessee was partly allowed. 8. Mr.M.Swaminathan, learned Senior Standing Counsel appearing for the appellant/revenue assisted by Mrs.Pushpa, learned Standing Counsel for the appellant/revenue submitted that the tribunal committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estions of Law may be answered in favour of the revenue. 11. Per contra, Mr.R.Vijayaraghavan, learned Senior Counsel appearing for the respondent/assessee placed reliance on the decision of the High Court of Bombay in Godrej & Boyce Manufacturing Company Limited, Mumbai Vs. Deputy Commissioner of Income Tax, reported in (2010) 328 ITR 0081, and the decision of the High Court of Delhi in Principal Commissioner of Income Tax Vs. Vedanta Limited, reported in (2019) 261 Taxmann 0179 (Delhi). 12. These decisions were referred to by the learned counsel in support of his submissions with regard to the mandate of Section 14A(2) of the Act. It is submitted that the Assessing Officer in terms of the said provision is bound to first record his satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en for the purposes of Section 14A and expenses towards non-taxable income must be excluded; (e) Once a proximate cause for disallowance is established - which is the relationship of the expenditure with income which does not form part of total income - a disallowance has to be effected. 14. It is further pointed out that under sub section 2 of Section 14A, the Assessing Officer is required to determine the amount of expenditure incurred by the assessee 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. 15. It is further pointed out that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has received income by way of dividend from Indian companies amounting to Rs. 24,83,08,996, which the assessee claimed to be exempted from tax. 19. Notice dated 27.08.2013 was issued to the assessee calling upon them to file the working sheet of the working done by them under Rule 8D for disallowance of the said sum under Section 14A. The assessee in response to such notice, submitted a letter dated 03.10.2013 giving the working under Rule 8D. The Assessing Officer after going through the submission made by the petitioner pointed out that the assessee had computed the disallowance of dividend by invoking the provisions of Rule 8D, but while doing so, ignored sub rule iii of the said rule. It appears that this was pointed out to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to why the revenue has preferred the appeal. However, on a closer reading of paragraph No.7.3 of the impugned order, we find that though the tribunal directs the assessee to work out the expenditure component towards administrative and managerial aspect so that the same shall be disallowed in the computation of income, but has not issued any specific directions to the Assessing Officer as to what has to be done after the assessee files the working sheet. Therefore, to that extent the tribunal has committed an error. Hence, we are of the considered view that the matter should be remanded for fresh consideration of the Assessing Officer in accordance with law. 22. For the above reasons, the Tax Case Appeals are allowed and the Substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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