TMI Blog2024 (5) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14A (2) of the Act. Decided in favour of assessee. Charging of interest u/s 234D - HELD THAT:- We direct the AO to verify whether the provision of Section 234D is applicable or not in this case and, if no such interest is chargeable, delete the demand of interest to that extent. - Shri Prashant Maharishi, AM And Shri Raj Kumar Chauhan, JM For the Assessee : Shri Ketan Ved, AR For the Revenue : Shri H.M. Bhatt, DR ORDER PER PRASHANT MAHARISHI, AM: 01. ITA Nos. 4338 4339/Mum/2023 are filed by Piem Hotels Limited (assessee/appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] on 16th October, 2013, against the A.Y. 2014-15 and 2016-17. 02. For A.Y. 2014-15, by this appellate order appeal filed by the assessee against the assessment order dated 24th November, 2016, passed under Section 143(3) of the Income-tax Act, 1961 (the Act), was partly allowed. 03. For A.Y. 2016-17, the learned CIT (A) has partly allowed the appeal of the assessee against the assessment order dated 13th December, 2018, passed under Section 143(3) of the Act. 04. The assessee is aggrieved for confirmation of disallowance under Section 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,014/- made by the learned Assessing Officer was confirmed. Therefore, the assessee is in appeal for both the years. 09. The learned Authorized Representative submitted that the disallowance confirmed by the learned CIT (A) is bad and illegal for the reason that (i) the learned Assessing Officer has not recorded his satisfaction prior to invoking provision of Rule 8D of the Rules. The learned Authorized Representative says that issue is covered by the decision of Hon'ble Bombay High Court in case of Tata Capital Limited in Income Tax Appeal No.1081 of 2018, dated 3rd April, 2021 [2024] 161 taxmann.com 557 (Bombay). He further submitted that identical issue has been decided in assessee s own case for earlier years. (ii) He further submitted that even if the disallowance is to be made only those investments which yielded exempt income during the year are required to be considered. As CIT (A) has rejected both these grounds, the orders of lower authorities are not sustainable and disallowance made u/s 14A of the Act is to be deleted. 010. The learned Departmental Representative vehemently submitted that (i) there is a proper satisfaction recorded by the learned Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissatisfaction with the correctness of the claim of Assessee in respect of the expenditure and to arrive at such dissatisfaction, he should give cogent reasons. We find support for this view in a judgment of this Court in Principal Commissioner of Income Tax (Central) v. JSW Energy Limited [2023] 153 taxmann.com 208/[2024] 460 ITR 496/[2023] 294 Taxman 407 (Bombay) where paragraphs 5 to 11 read as under: 5. Section 14A of the Act reads as under: Expenditure incurred in relation to income not includible in total income. 14A. (1) Notwithstanding anything to the contrary contained in this Act, for the purposes of computing the total income under this Chapter no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctness of the claim of the assessee in respect of the expenditure and to arrive at such dis-satisfaction he should give cogent reasons. 8. Ms Jain relied upon three judgments of this court, viz., Principal Commissioner of Income Tax v. Bajaj Finance Ltd. [[2019] 110 taxmann.com 303 (Bombay) ], Principal Commissioner of Income Tax-2 v. Bombay Stock Exchange Ltd. [[2020] 113 taxmann.com 303 (Bombay) ] and Principal Commissioner of Income Tax v. Godrej Boyce Mfg. Co. Ltd. [2023] 149 taxmann.com 222/292 Taxman 497 (Bombay) to submit that the Assessing Officer must first record a conclusion that having regard to the accounts of the assessee, he is not satisfied with the disallowance offered by the assessee in terms of Section 14A (2) of the Act and it is only on being dissatisfied with the disallowance offered by the assessee, can Rule 8D of the Rules be invoked to compute the disallowance. 9. Paragraph 9 of Bajaj Fiance Ltd. (supra) reads as under: 9. Question No. (ii) pertains to disallowance made by the Assessing Officer under Section 14A of the Act read With Rule SD. The Tribunal, however, deleted the disallowance on the ground that the Assessing Officer had not recorded the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion by the AO with regard income. Further, the AO has not recorded any satisfaction that the working of inadmissible expenditure u/s 14A is incorrect with regard to the books of account of the assessee. The proviston u/s 14(2) does not empower the AO to apply Rule 8D straightaway without considering the correctness of the assessee's claim in respect of expenditure incurred in relation to the exempt income. We agree with the view of the ITAT that in the present case the AO has neither examined the claim in respect of expenditure incurred in relation to exempt income of the assessee nor has recorded any satisfaction with regard to the correctness of assessee's claim with reference to the books of account. Consequently, the disallowance made by applying the Rule 8D is not only against the statutory mandate but contrary to the legal principles laid down. In our view too, the CIT (A) has rightly deleted the addition made on account of interest expenditure as the assessee had sufficient interest free surplus fund to make the investment and the ITAT has rightly deleted the disallowance made by the AO u/s 14A r.w Rule 8D. Consequently we hold that, the interest expenditure cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer's finding in paragraph 5.2 of the assessment order is based relying upon a non existent assessment order and that indicates clear non application of mind. 8. The order of the ITAT (Panaji Bench) in the case of Sesa Goa Limited has been upheld by the Goa Bench of this Court in CIT, Goa v. Sesa Goa Limited, Panaji, Goa [2021] 127 taxmann.com 354 where the Division Bench concurred with the view taken by the ITAT that the Assessing Officer did not record his satisfaction why the disallowance made by Assessee was incorrect. 9. In the circumstances, in our view, no substantial question of law arises. Appeal dismissed. 014. Thus, According to Section 14A (2) of the Act, it is the duty of the learned Assessing Officer to first record his satisfaction that why the claim of the assessee is not correct according to him on verification of the accounts of the assessee. There is no whisper in the assessment order about examination of claim of the assessee, holding such claim as not correct on examination of accounts of the assessee. Thus, The learned Assessing Officer has failed to record his satisfaction as provided under that section. Therefore, the issue is squarely covered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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