TMI Blog2021 (7) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO is in violation of the provisions of section 14A read with rule 8D of Income Tax Rule. As such, the AO was under the obligation to record the dissatisfaction about the correctness of the claim of the assessee. We find support and guidance from case of DCIT v/s Pidilite Industries Ltd. [ 2019 (6) TMI 470 - ITAT MUMBAI] wherein it was held that the AO has to form an opinion as to why the disallowance offered by the assessee, having regards to its accounts, was not satisfactory or correct. The aforesaid satisfaction of the AO is sine-qua-non, before acquiring jurisdiction under section 14A r.w. rule 8D - we are not convinced with the order of the ld. CIT-A and thus, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Nature of expenses - business development expenditure - Revenue or capital expenditure - HELD THAT:- As decided in assessee own case[ 2016 (11) TMI 1730 - ITAT AHMEDABAD] business development expenditure to be Revenue in nature - accordingly, we dismiss the ground of appeal of the Revenue. - ITA No. 131/Ahd/2018, 307/Ahd/2018, 132/Ahd/2018, 308/Ahd/2018, 133/Ahd/2018, 309/Ahd/2018, 178/Ahd/2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to interest disallowance of Rs.79,774/- by observing that the amount of interest income shown by the assessee exceeds the amount of interest expenses and therefore there cannot be any disallowance qua the interest expenses under section 14A r.w.r. 8D of Income Tax Rules in view of the judgment of Hon ble Gujarat High Court in the case of PCIT vs Nirma Credit and Capital reported in 82 taxmann.com72. 4.1 However, the Ld. CIT(A) was pleased to confirm the disallowance on account of administrative expenses on the reasoning that ITAT in the own case of the assessee has made the disallowance of such expenses in ITA bearing No. 1510/Ahd/2012 for A.Y. 2009-10. 5. Being aggrieved by the order of the Ld. CIT (A) both the assessee and the Revenue are in appeal before us. 6. The assessee is in appeal against the confirmation of the addition of Rs. 44,26,707/- whereas the Revenue is in appeal for the amount deleted by the Ld. CIT(A) for Rs.79,774/- in ITA No. 307/Ahd/2017. The relevant ground of appeal of the Revenue reads as under: On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.79,77 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moto based on cogent reasons has invoked the provisions of section 14A read with rule 8D and made the disallowance of Rs. 45,06,481/- only. 12.2 Now the controversy arises, whether the AO can resort to the provisions of section 14A read with rule 8D without rejecting the suo-moto disallowance made by the assessee. In this regard, we find that the provisions of section 14A of the Act requires that the AO has to record the satisfaction after having regard to the accounts of the assessee as well as correctness of the claim of the assessee in respect of the expenditure incurred in connection with the exempted income. Admittedly, there was the disallowance made by the assessee for Rs. 11,98,579/- against the exempted income. But the AO has not pointed out any defect in the disallowance made by the assessee. Thus in our considered view such act of the AO is in violation of the provisions of section 14A read with rule 8D of Income Tax Rule. As such, the AO was under the obligation to record the dissatisfaction about the correctness of the claim of the assessee. 12.3 In this regard, we find support and guidance from the order of Hon ble Mumbai Tribunal in the case of DCIT v/s Pidilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount 1. Business promotion-(Happy Holi) Rs.2436832.00 2. Business Promotion-(Summer 2010) Rs.7733552.14 3. Business Promotion-(Rimzim Gire Savan) Rs.7517165.00 4. Business Promotion-(Jayranchhodmakhanchor) Rs.7968183.79 5. Business Promotion-(Dipostavi Rang) Rs.8262596.62 6. Business Promotion-(Chali Chali Re Patang) Rs.8501635.50 7. Business Promotion-(Holi Avi Rango Lavai) Rs.2826967.00 8. Business Development Expenses Rs.2623628.00 9. Business development expense-SUBS Scheme Rs.1259889.00 TOTAL Rs.49130449/- 17. Similar kinds of schemes, discussed above, were launched by its opponent namely Divya basker and therefore to compete the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in assessee's own case in ITA No.479/Ahd/2005 for Asst. Year 2001-02 and others, vide order dated 19.11.2010. 8. We have heard the rival contentions and perused the material on record. We find that the issue relating to business development expenses to be treated as business expenditure and not capital expenditure, has been dealt and decided by the Coordinate Bench in ITA No.479/Ahd/2005 for Asst. Year 2001-02 and others, vide order dated 19.11.2010, by observing as under:- Asst. Years: 2005-06, 2006-07, 2007-08 others 11. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. We find that the assesses has claimed business development expenses as under - A.Y. Amount 2001-02 64,22,000 2002-03 53,67,735 2003-04 56,79,197 The AO disallowed the above expenditure by treating the same as gratuitous payment in the A.Y. 2001-02, capital expenditure in the A.Y. 2002-03, and both gratuitous and capital expenditure in A.Y. 2003-04. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for giving benefit or gift to the subscribers of daily newspaper who paid the entire subscription of the year in advance. Thus, we find that the expenditure had a close nexus with the business of the asssssee. No material was brought on record by the revenue to show that the expenditure in question was incurred for any other purpose except business consideration by the assessee. It is not the case of the revenue that the recipients Asst. Years: 2005-06, 2006-07, 2007-08 others of benefit were relatives of the assessee. Further, in our considered view, a business expenditure for being deductible, it is not necessary that the same must have been incurred under some compulsion. Voluntary expenditures incurred out of commercial expediency are also fully deductible under the Income Tax Act. We therefore find that the orders of the AO in making disallowance for the reason mentioned in the orders are not sustainable for all the 3 years under consideration. As the genuineness of expenditures under present appeals are not in dispute and no further investigation of any fact is required to be made for deciding the issue under consideration, in our considered opinion, on the facts involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T-A erred in deletion the addition made by the AO for Rs. 79,774.00 representing the interest expenditure under section 14A r.w.r. 8D of Income Tax Rule. 23.1 At the outset, we note that the issue raised by the Revenue has already been dismissed by us along with the appeal of the assessee bearing ITA No. 131/AHD/2018 for the AY 2011-12. For the detailed discussion, please refer the relevant Paragraph No. 12 of this order. Thus we dismiss the ground of appeal of the Revenue. 24. In the result, the appeal of the Revenue is dismissed. Now coming the appeal of the assessee bearing ITA No.132/Ahd/2015 for A.Y. 2012-13. 25. The assessee has raised as many as four grounds of appeal but the issue revolves to the amount of Rs. 71,41,936/- representing the expenditure disallowed by the AO which was confirmed by the Ld. CIT(A). 26. At the outset we note that similar ground was raised by the assessee in his own case bearing ITA No.131/Ahd/2018 corresponding to A.Y. 2011-12 which has been decided in favour of assessee vide paragraph No.12 of this order. For the detailed discussion please refer the above mentioned paragraph number of this order. Accordingly, we hold that findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee is allowed. Coming to the appeal of the Revenue bearing ITA No. 309/Ahd/2018 for A.Y. 2013-14. 34. The Revenue has raised the followings grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.4,65,56,208/- on business development expenditure. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.23,51,043/- u/s.14A of the Act on the ground that the assessee has large capital, ignoring the fact that the funds of the assessee were mixed. 3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) ought to have upheld the order of the AO. 4. It is therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the A.O be restored to the above extent. 35. At the outset we note that similar grounds 1 and 2 were raised by the Revenue in ITA bearing No.307/Ahd/2018 corresponding to A.Y. 2011-12 which has been decided in favour of assessee vide paragraph No. 12 22 of this order. For the detailed discussion please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 307/Ahd/2018 will mutatis mutandis apply here in this case also. 42. In the result, the appeal of Revenue is dismissed. Now coming the appeal of the assessee bearing ITA No.741/Ahd/2018 for A.Y. 2015-16. 43. The issue raised by the assessee is that Ld.CIT(A) erred in confirming disallowance of Rs. 1,26,63,477/- made by the made by the Assessing Officer u/s 14A of the Act. 44. At the outset we note that similar ground was raised by the assessee in his own case bearing ITA No.131/Ahd/2018 corresponding to A.Y. 2011-12 which has been decided in favour of assessee vide paragraph No. 12 of this order. For the detailed discussion, please refer the above mentioned paragraph number of this order. Accordingly, we hold that finding given in above paragraphs with regard to ITA No.131/Rjt/2018 will mutatis mutandis apply here in this case also. 45. In the result, the appeal of the assessee is allowed. Coming to the appeal of the Revenue bearing ITA No. 1143/Ahd/2018 for A.Y. 2015-16 46. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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