Bombay High Court
Pr. Commissioner Of Income Tax-3 vs M/S. Radha Madhav Investments Ltd on 21 January, 2019
Bench: Akil Kureshi, M.S. Sanklecha
11. os itxa 934-16.doc
R.M. AMBERKAR
(Private Secretary)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
INCOME TAX APPEAL NO. 934 OF 2016
Pr. Commissioner of Income Tax -3 .. Appellant
Versus
M/s. Radha Madhav Investments Ltd .. Respondent
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Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the Appellant
Mr. Sanjiv M. Shah for the Respondent
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CORAM : AKIL KURESHI &
M.S. SANKLECHA, JJ.
DATE : JANUARY 21, 2019.
P.C.:
1. This appeal under Section 260 A of the Income Tax Act, 1961 (Act), challenges the order dated 17.4.2015 passed by the Income Tax Appellate Tribunal ("the Tribunal" for short). This appeal relates to the Assessment Year 2009-10.
2. Revenue has urged following question of law for our consideration:-
" Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not considering the fact that the amount of disallowance u/S. 14A of the Income Tax Act, 1961 has to be computed as per Rule 8D of Income Tax Rules, 1962?"
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11. os itxa 934-16.doc
3. The respondent is engaged in the business of trading in various items, investment and financing. The respondent was in receipt of exempt income aggregating to Rs. 44 crores. The respondent had made an suo motu disallowance of Rs. 1.65 crores of its expenditure as having been incurred to earn the exempt income. The Assessing Officer rejected the suo motu disallowance on the ground that it was not in terms of Rule 8D of the Income Tax Rules (Rules). Thus, the Assessing Officer by order dated 31.3.2011 under Section 143(3) of the Act which assessing the respondent's income at Rs. 25.84 lacs, had disallowed under Rule 8D of the Rules an amount of Rs. 3.55 crore in the aggregate.
4. In appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the view of the Assessing Officer on this issue.
5. On further appeal, the Tribunal by its impugned order held that once the assessee has made a suo motu disallownace of expenditure incurred to earn exempt income, 2 of 4 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:00 :::
11. os itxa 934-16.doc then it is incumbent upon the Assessing Officer to examine the correctness of such claim and record his dissatisfaction with the claim made, before he proceeds to work out the disallowance under Rule 8D of the Rules. In this case, the impugned order records the fact that no such non- satisfaction with the suo motu disallowance of expenditure has been reached by the Assessing Officer. Therefore, the application of Rule 8D of the Rules was not appropriate. Thus, allowed the respondent's appeal.
6. Mr. Malhotra, the learned counsel for the Revenue relied upon the order dated 31.3.2011 of the Assessing Officer and submitted that this appeal needs to be admitted.
7. We note that the view taken by the Tribunal is on the basis of clear mandate of Section 14(2) of the Act which provides that the Assessing Officer will determine the amount of expenditure to be disallowed to earn exempt income as provided in Rule 8D of the Rules, as if he is not satisfied with suo motu disallowance made by the respondent. In fact this interpretation of Section 14A(2) of 3 of 4 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:00 :::
11. os itxa 934-16.doc the Act by the Tribunal has now been taken by the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Co Ltd Vs. Dy. CIT & Anr 1 wherein it has been observed as under:-
" Whether such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It may only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable.
8. In view of the decision of the Apex Court, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. Therefore, the Tax Appeal is dismissed.
[ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ] 1 [2017] 394 ITR 449 (SC) 4 of 4 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:00 :::