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TMI Blog2018 (12) TMI 1920X X X X Extracts X X X X X X X X Extracts X X X X ..... als) erred in upholding the action of the Assessing Officer the following respects: (a) In not accepting the reasonable basis working node by the appellant for the purpose of making disallowance under section 14A of the Act: (b) in not appreciating the fact that provisions of sub-section (2) of section 14A of the Act could be invoked only if the Assessing Officer, having regard to the accounts of the assessee, was 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: (c) In not appreciating the fact that investment in group companies were made for strategic purpose and are not with a view to earn exempt income; (d) In not appreciating the fact that majority of the investments were received by the Appellant under a scheme of amalgamation; 1.3 Without prejudice to the above grounds of appeal, the Commissioner of Income-tax (Appeals) erred in upholding tile action of the Assessing Officer by considering gross amount of interest at Rs. 1.63.69.647/- instead of net amount of interest at Rs. 1,60,29,200/-while computing the amount of interest for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,911/-. After allowing the deduction of the voluntary disallowance of Rs. 441/- that was offered by the assessee the A.O made a further addition/disallowance of Rs. 42,15,470/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The assessee assailed the disallowance made by the A.O under Sec. 14A r.w. Rule 8D on multiple grounds before the CIT(A) viz. (i) that the A.O had failed to record his satisfaction as regards the incorrectness the claim of the assessee in respect of the expenditure of Rs. 441/- that was shown by it for earning of the exempt dividend income; (ii) that the A.O had erred in failing to appreciate that the investments made by the assessee in the shares of the associates and group companies were in the nature of strategic investments and not with an intention of earning of exempt dividend income; (iii) that the A.O had erred in working out the disallowance by considering the gross amount of interest and not the net amount of interest; and (iv) that the A.O had erred in adding the amount of disallowance worked out under Sec.14A r.w.r. 8D while computing the "book profit‟ under Sec. 115JB of the I.T. Act. The CIT(A) after deliberatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/2016; dated 13.06.2018). It was submitted by the ld. A.R that the Tribunal while disposing off the appeal of the assessee for the immediately preceding year i.e A.Y. 2011-12, after deliberating on the facts which were similarly placed as against those for the year under consideration had vacated the disallowance made by the A.O under Sec. 14A r.w. Rule 8D. It was averred by the ld. A.R that the A.O while dislodging the claim of the assessee as regards the expenditure that was incurred for earning of the exempt dividend income had failed to record his satisfaction as regards the incorrectness of the said claim. It was submitted by the ld. A.R that in the present case also the A.O had rejected the claim of the assessee that an amount of Rs. 441/- only was attributable towards earning of the exempt dividend income without recording his satisfaction as to why the same was not to be accepted. The ld. A.R submitted that the assessee during the course of the assessment proceedings had only at the behest of the A.O as to why the expenses incurred for earning of the exempt dividend income may not be worked out as per Sec.14A r.w.Rule 8D, had therein vide its letter dated 20.03.2015 furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not arise. 8. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the view taken by the CIT(A). Admittedly, the A.O had failed to record his satisfaction as regards the incorrectness of the claim of the assessee in respect of the expenses incurred for earning of the exempt dividend income, having regard to the accounts of the assessee. Apart therefrom, the said view taken by the A.O was approved by the CIT(A), who we find held a strong conviction that it was not obligatory at all for the A.O to have recorded his satisfaction. In our considered view the issue as to whether it is obligatory on the part of the A.O to record his satisfaction as to why the claim of the assessee in respect of the expenses incurred for earning of the exempt dividend income was not to be accepted is no more res integra and has been settled by the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC). The Hon‟ble Apex Court in its aforesaid order had observed that it is obligatory on the part of the A.O to record his satisfaction that having regard to the accounts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of disallowance offered by the assessee under Sec. 14A in i ts return of income for the year under consideration was not to be accepted, having regard to its accounts, it can safely be concluded that the mandate of the judgment of the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR449 (SC) had not been satisf ied by him. We thus, holding a conviction that as the order passed by the A.O in the case before us, is not in conformity with the judgment of the Hon'ble Apex Court in the case of Godrej & Boyce Manufacturing Company (supra), hence the disallowance of Rs. 48,29,256/- made by the A.O cannot be sustained and is liable to be vacated. We thus, set aside the order of the CIT(A) and delete the further disallowance of Rs. 48,29,265/- made by the A.O under Sec. 14A r.w R u l e 8 D . " 10. We thus in terms of our aforesaid observations, respectfully following the judgment of the Hon‟ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC) and the order passed by the Tribunal in the assesses own case for A.Y. 2011-12, therein vacate the further disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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