TMI Blog2022 (4) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2013-14 as well as the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (supra), we hold that the Assessing Officer was not justified in making disallowance under section 14A of the Act. Thus, the ground raised by the assessee is allowed. Exclusion of the disallowance under section 14A for disallowance u/s 115JB - HELD THAT:- As in the case of Sobha Developers Ltd. v. DCIT [ 2021 (1) TMI 378 - KARNATAKA HIGH COURT] wherein, it was held that the disallowance made under section 14A of the Act could not be added to book profits of the assessee under section 115JB. Royalty payment as revenue expenditure - HELD THAT:- Against the disallowance of royalty payment by following the decisions of the Tribunal in assessee s own case for the assessment years 2012-13 and 2013-14, the ld. CIT(A) directed the Assessing Officer to allow the royalty payment by treating it as revenue expenditure. Thus, we find no infirmity in the order passed by the ld. CIT(A). Just because the Revenue has filed an appeal against the order of the Tribunal before the Hon ble Madras High Court, we cannot take a different view until and unless the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance under section 14A by applying Rule 8D as well as under section 115JB of the Act. 2.3 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, facts of the case and by following the decision of the Hon ble Delhi High Court in the case of Joint Investments Pvt. Ltd. v. CIT 372 ITR 694 (Delhi), the ld. CIT(A) directed the Assessing Officer to restrict the disallowance under section 14A r.w. Rule 8D to ₹.17,10,42,084/- as well as directed to exclude the disallowance under section 14A of the Act while computing the book profit under section 115JB of the Act for the assessment year 2012-13. 3. On being aggrieved, the assessee is in appeal before the Tribunal against the restriction of disallowance under section 14A of the Act. The ld. Counsel for the assessee has submitted that in the return of income, the assessee has suo motu disallowed ₹.8,000/- under section 14A of the Act towards expenses incurred for earning the exempt income. It was further submission that the Assessing Officer has not recorded any satisfaction on the correctness or otherwise of the suo motu disallowance of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has prayed for following the order of the Tribunal for assessment year under appeal. We have gone through the order of the Tribunal in assessee s own case for the assessment year 2013-14 in I.T.A. No. 1766/Chny/2019 vide order dated 16.12.2019, wherein, in similar facts and circumstances an identical issue was subject matter in appeal before the Tribunal and the Tribunal has observed and held as under: 7. We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to disallowance u/s14A of the Act. Admittedly, assessee made investments which yielded dividend income of ₹ 61,44,03,001/- and investments were made in subsidiary companies for strategic purpose. Admittedly, assessee itself had offered suo motu disallowance of ₹ 73,602/- u/s.14A of the Act. The provisions of Sub Section (2) of Section 14A of the Act provides that resort to provisions u/s.14A of the Act can be made only if he is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred to earn exempt income. Therefore, it is mandatory on the part of the Assessing Officer to record a satisfaction as to correctne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the claim of the assessee is incorrect. In the similar facts, the Hon ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, 402 ITR 640 held that in the absence of the finding of the Assessing Officer resort to provisions of Section 14A of the Act r.w.r 8D of the Rules cannot be made. This decision was followed by the Coordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra) cited by holding as under:- Ground No. 8 challenges the addition of ₹3,88,882/- invoking the provision of Section 14A of the Act. It is the contention of the appellant that the appellant had not incurred any expenditure to earn exempt income. The Assessing Officer had not given any findings as to how the claim of the assesseebank that no expenditure was incurred to earn the exempt income was incorrect. In the absence of this finding resort to the provisions of rule 8D of the Income Tax Rules cannot be made as held by the Hon ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, (2018) 402 ITR 640 . Therefore this ground of appeal filed by the assessee is allowed. Accordingly, this ground of appeal stands allowed in favour of the assessee . Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground raised by the assessee is allowed. 6.1 However, the only objection raised by the ld. DR is that the issue of recording satisfaction has been raised for the first time before the Tribunal and not raised earlier. Admittedly, it is second round of litigation. On going through the materials available on record, we find that in the first round of litigation before the Tribunal, the assessee has raised specific grounds of appeal while filing the appeal papers vide letter dated 11.02.2016. Even otherwise, by leave of the Tribunal, the assessee can raise additional legal ground and therefore, the argument of the ld. DR is rejected. 7. So far as the ground raised in the appeal of the Revenue relating to exclusion of the disallowance under section 14A of the Act while computing the book profit under section 115JB of the Act is concerned, the exempt income claimed by the assessee was ₹.17,10,42,084/- against which the assessee s disallowance under section 14A was ₹.8,000/-, whereas, the Assessing Officer determined the disallowance under section 14A r.w. Rule 8D at ₹.34,28,05,564/-. While computing the book profits under section 115JB of the Act, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent. (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or (i) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss, and as reduced by,- (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the statement of prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered in favour of the assessee and against the revenue. In the result, the order passed by the tribunal dated 09.01.2015 insofar as it pertains to the findings recorded against the assessee is hereby quashed. 7.5 The ld. DR could not controvert the above decision of the Hon ble Karnataka High Court or filed any other higher Court s decision having modified or reverted or any decision favouring the Revenue. Respectfully following the above decision in the case of Sobha Developers Ltd. v. DCIT (supra), the ground raised by the Revenue is dismissed. I.T.A. Nos. 3255 and 3217/Chny/2018 [AY: 2014-15] 8. During the assessment year 2014-15, the assessee has received dividend of ₹.58,39,68,173/- and the assessee has disallowed ₹.73,037/- towards expenses incurred for earning the exempt income. However, the Assessing Officer disallowed additional amount of ₹.11,40,06,138/- under section 14A r.w. Rule 8D. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 8.1 On being aggrieved, the assessee is in appeal ..... 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