TMI Blog2019 (2) TMI 1956X X X X Extracts X X X X X X X X Extracts X X X X ..... king the provisions of section 14A of the Act read with Rule 8D of the Rules. Hence,also direct the AO to delete the addition while computing book profit. Accordingly, the appeal of the assessee is decided and partly allowed. - ITA No. 3923/Mum/2017 - - - Dated:- 14-2-2019 - SRI MAHAVIR SINGH, JUDICIAL MEMBER For the Appellant : Shri Kirit Kamdar, AR For the Respondent : Shri Kailash Kanojiya, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-54, Mumbai [in short CIT(A)], in appeal No. CIT(A)-54/DCCC-6(3)/IT-126/15-16 vide dated 02.02.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Central Circle-6(3), Mumbai (in short ACIT/ITO/ AO ) for the A.Y. 2012-13 vide dated 26.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter the Act ). 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenses relatable to exempt income made by AO by invoking the provisions of section 14A of the Act, read with Rule 8D of the Income Tax Rules, 1962 (hereinafter the Rules ). For this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under section 14A of the Act read with Rule 8D of the Rules at ₹ 82,28,143/-, and after allowing set off of suo moto disallowance made by the assessee, he worked out the disallowance at ₹ 38,59,778/-. The AO further restricted the disallowance at ₹ 13,11,907/- in view of the fact that the expenditure debited in the P L Account was less than the disallowance computed by the Assessing Officer. Thereafter, he restricted the disallowance at ₹ 13,11,907/-. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the action of the AO partly by directing the AO to recompute the disallowance under section 14A read with Rule 8D of the rules after considering the investments which have yielded the exempt income during the year. The CIT(A) also directed the AO to recompute the disallowance but it was clarified that the disallowance under section 14A read with section 8D of the Rules cannot be less than the sum of ₹ 43,68,365/- as computed and disallowed by the assessee suo moto in the return of income. The CIT(A) also confirmed the action of the AO in regard to computing the disallowance while computing the book profit under section 115JB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee i.e. revised disallowance is wrong. There is no satisfaction. The learned Counsel for the assessee relied on the decision of Hon ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018] 402 ITR 640 (SC), wherein the Hon'ble Supreme Court in regard to satisfaction reads as under:- 41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the AO. 8. The learned Counsel for the assessee also drew our attention to the Tribunals order in the case of Sajjan India Ltd. vs. ACIT (2018) 89 taxmann.com 21 (Mumbai-Trib), wherein it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply. The Revenue fails on this ground. We order accordingly. The second controversy is w.r.t. the disallowance of administrative and other expenses u/r 8D(2)(iii) r.w.s. 14A. The learned counsel for the assessee has claimed that the assessee s has different divisions such as Head office and factories etc. It is claimed that the assessee has maintained separate books of accounts for each division. It is claimed that the investments are only monitored, controlled, maintained and managed from HO and other divisions have no role to play in dealing with the investments, which can be verified by Revenue. It is claimed that the AO can look into books of accounts and after verifications can be conducted by the AO and the AO should consider HO expenses only for disallowance u/r 8D(2)(iii) r.w.s. 14A. It is claimed that this ground was raised before the learned CIT(A) but doors of justice was shut by learned CIT(A) as no revised return was filed by the assessee. It is claimed that since the assessee never raised this issue in preceding year i.e. 2010-11, the ITAT had no occasion to deal with the same but the assessee did raise this issue in earlier years i.e. 2007-08 to 2009-10, wherein ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch have actually yielded exempt income during year under consideration and it is claimed that the said issue is covered by decision of Special Bench of the Delhi-tribunal in the case of Vireet Investment Private Limited v. ACIT ( 2017) 82 taxmann.com 415(Del SB). The learned DR fairly agreed that this issue is covered by decision of Special Bench, Delhi ITAT in the case of Vireet Investment Private Limited (supra). We direct the AO to decide this issue in the light of decision of Special Bench in the case of Vireet Investment Private Limited(supra), wherein only those instruments/securities which yielded exempt income during the previous year relevant to the impugned assessment year shall be considered for computing disallowance u/s 14A r.w.r. 8D. The Special Bench in para 11.16 held that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. We are bound by decision of Special Bench and Respectfully following the same, we direct the AO to compute disallowance u/s 14A r.w.r. 8D(2)(iii) in accordance with the ratio of law laid down by Special Bench ITAT, Delhi in the case of Vireet Investment Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1999) 237 ITR 392(AP) as well Hon ble Gujarat High Court in the case of Gujarat Gas Company Limited v. JCIT reported in (2000) 245 ITR 84(Guj) has taken a similar view. Hon ble Gujarat High Court in the case of Gujarat Gas Company Limited(supra) has arrived at the said decision after considering CBDT circular No. 549 dated 31-10-1989 (1990) 182 ITR (st) 1 while arriving at the said decision that assessed income can fall below returned income in proceedings u/s 143(3) r.w.s. 143(2). The Hon ble Supreme Court decision in the case of CIT v. Sun Engineering Work Private Limited (1992) 198 ITR 297(SC) was in context of re-assessment proceedings initiated u/s 147 wherein Hon ble Supreme Court held that reassessment proceedings initiated u/s 147 are for the benefit of revenue and not the assessee, wherein the mandate is to bring to tax income which has escaped assessment while presently we are concerned with proceedings initiated u/s 143(3) r.w.s. 143(2). We order accordingly. 9. The learned Counsel for the assessee also argued that the disallowance while computing the book profit under section 115JB of the Act cannot be made under Rule 8D of the Rules in view of the decision of Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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