TMI Blog2022 (9) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be displaced by the Assessing Officer. Hence, Ground No. 1 of the Cross Objection of the assessee in this regard is not tenable. Disallowance under Section 14A cannot exceed the exempt income by way of dividend - The issue has been discussed by the Co-ordinate Bench in ACIT vs. Hindustan EPC Company Ltd., [ 2022 (8) TMI 904 - ITAT DELHI] and thus no longer res integra. The CIT(A) shall accordingly restrict the disallowance to the extent of exempt income while making denovo adjudication. Hence, Ground No.2 of the Cross Objection is allowed. Disallowance under Rule 8D(2)(iii) - Since the issue has been restored to the file of the CIT(A), the assessee shall be at liberty to place such arguments and adduce such evidence as may be considered expedient in the course of fresh adjudication by the CIT(A). Hence, Ground No.3 of the Cross Objection is thus allowed for statistical purposes. Adjustment made in the book profit under Section 115JB of the Act towards disallowance under Section 14A - We find merit in the contention of the assessee that estimated disallowances computed under Rule 8D cannot be adopted for the purposes of Section 115JB of the Act. This aspect i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(3) of the Act, the Assessing Officer found that the assessee has earned exempt income by way of dividend amounting to Rs.4,06,63,808/-. The Assessing Officer resorted to Rule 8D of the Income Tax Rules and disallowed Rs.7,77,65,481/- under normal provisions of the Act. Similarly, book profits under Section 115JB were enhanced with the same amount derived as per Rule 8D of the Income Tax Rules, 1963. 5. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) has granted certain reliefs and reversed the action of the Assessing Officer. The CIT(A) dealt with the issue herein: 6. Ground nos. 3,4,7,8 and 9 relate to the addition of Rs.7,75,24,213/~and Rs.2,32,268/-made by the AO under Rule 8D(2)(ii) and 8D(2)(iii) respectively read with section 14A of the Act, under the normal provisions as well as working of book profit under section 115JB of the Act. The appellant has earned dividend amounting to Rs.4,06,63,808/-, and no such disallowance under section 14A has been made, though the dividend income has been treated as exempt. 6.1 It is observed that AO has computed disallowance under Rule 8D(2)(ii) for Rs.7,75,24,213/- and Rs.2,32,268/- under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, it is to be mentioned that the AO has made disallowance on the basis of the decision of Hon'ble Delhi High Court in the case of CIT(Central)-2 vs. Goetze India Ltd. (ITA No.1179/2010) and in view of the specific provision of clause (f) of explanation (1) to sectionll5JB, for which the appellant has not provided any counter argument to establish that these are the expenditure not to be disallowed while working out the book profit under section 115JB of the Act. The ratio of the said judgement by Hon'ble Delhi High Court is squarely applicable in this case. Therefore, the action of AO is found to be in order for making such disallowance. The relied case law by appellant is not applicable and distinguishable on facts and ratio laid down. However, the disallowance is sustained to an amount of Rs.1,47,940/- looking to the disallowance sustained in the normal provisions. Accordingly, the appeal is partly allowed on these grounds. 6. Aggrieved by the partial relief granted by the CIT(A), the Revenue as well as the assessee are in respective captioned appeal and Cross Objection. The CIT(A) has summarily deleted the additions of Rs.7,75,24,213/- towards proportionate in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions either. The Assessing Officer has issued specific show cause notice with reference to Section 14A of the Act observing that large chunk of income compromises of dividend income which is claimed to be exempt. The assessee has responded to the show cause notice. The Assessing Officer has made elaborate discussion on the issue and has resorted to the disallowance under Section 14A of the Act. Noticeably, the assessment was framed under Section 153A where requisite information/accounts of the assessee were called for. Needless to say, the satisfaction of the Assessing Officer is the assent of his mind. The Assessing Officer has inquired on the issue having regard to the details/information filed by the Assessee. The text and tenor of the assessment order shows that the Assessing Officer has objectively looked into the issue having regard to the details/accounts of the assessee and thus the contention of arriving at contemplated satisfaction is fulfilled. More so, opportunity was duly granted and availed by the Assessee. The facts and circumstances imply presence of satisfaction contemplated under Section 14A(2) of the Act. Noticeably, it is not a case where the assessee has offe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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