TaxTMI 
TaxTMI 
2017 (4) TMI 469
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....,008/- and in the tax audit report it was stated by the assessee that such depreciation is claimed on the WDV of assets transferred from Godrej Appliances Ltd., pursuant to demerger of the said company. The AO called upon the assessee to explain why the claim of depreciation should not be disallowed. Though, the assessee justified its claim through an elaborate submission made before the AO, however, the AO taking note of the amendment made to Explanation 2B to section 43(6) of the Act from A Y 2004-05 disallowed assessee's claim of depreciation on assets acquired on demerger and, accordingly, reduced the claim of depreciation by an amount of Rs. 3,09,61,631/- thereby allowing depreciation of Rs. 79,07,22,377/-. Though, the assessee challenged the part disallowance of depreciation before the first appellate authority, he also confirmed the disallowance taking note of the fact that in assessee's own case ITAT has decided the issue against the assessee. 4. The learned AR fairly submitted that the issue has been decided against the assessee by the ITAT while deciding assessee's appeals for A.Ys. 2003-04 to 2010-11 in three separate orders. The learned DR agreed with the aforesaid s....
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....e's appeal. 7. The learned AR submitted, issue stands decided in favour of the assessee by the decision of the Tribunal in its own case for A.Ys. 2008-09, 2009-10 and 2010-11. The learned DR has not controverted the aforesaid submission of the assessee. 8. We have heard the parties and perused the material on record. As could be seen, the assessee has claimed similar expenditure in A.Ys. 2008-09, 2009-10 and 2010-11 as well. In fact, the payments in those assessment years were also made to the same party. However, while deciding assessee's appeals, the Tribunal has allowed assessee's claim of expenditure by holding that expenditure incurred on brand building is revenue in nature. Respectfully following the aforesaid decision of the Tribunal in assessee's own case in ITA Nos. 8488/Mum/2011 & Ors dated 23.08.2016, we delete the addition made by the AO while allowing assessee's claim. 9. At this stage, it is relevant to observe that apart from the ground raised in the memorandum of appeal, the assessee vide letter dated 22.03.2017 has sought to raise issues relating to disallowance made u/s. 14A read with Rule 8D by way of additional grounds which are as under: "1.0.....
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....eld that after introduction of Rule 8D disallowance u/s. 14A has to be made in terms of the method prescribed under the said Rule. He further observed that in AY 2010-11, the CIT(A) while sustaining the disallowance of administrative expenditure made under Rule 8D(2)(iii) has deleted the disallowance of interest expenditure made under Rule 8D(2)(ii) 11. Being aggrieved of the aforesaid decision of the CIT(A), both the assessee and the department are in appeal before us. While the assessee is challenging the part disallowance sustained by the CIT(A), the department has challenged relief granted by the CIT(A) to the assessee. 12. The learned AR challenging the disallowance of expenditure u/s.14A read with Rule 8D has advanced the following propositions: i) Without recording satisfaction with regard to the correctness of assessee's claim of expenditure with reference to the books of account of the assessee, the AO canot make disallowance u/s. 14A read with Rule 8D. In support of the aforesaid contentions, the learned AR has relied on the decision of Hon'ble Bombay Higg Court in its own case i.e. Godrej & Boyce Manfucturing Co. Ltd. v. DCIT (2010) 328 ITR 81. ii....
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....t u/s. 14A is as per the books of account and clearly attributable to earning of exempt income. On a perusal of the assessment order, we have not found any discussion by the AO with regard to the computation of inadmissible expenditure made by the assessee forming part of the return of income. The AO has not recorded any satisfaction that the working of inadmissible expenditure u/s. 14A is incorrect having regard to the books of account of the assessee. The Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. v. DCIT (supra), while examining the importance of recording of satisfaction by the AO in terms of section 14A(2) has held as under: Under sub-section (2), the Assessing Officer is required to determine the amount of expenditure incurred by an assessee in relation to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed. The method, having regard to the meaning of expression "prescribed" in section 2(33), must be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income....
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....regard to the correctness or otherwise of assessee's claim with reference to the books of account. That being the case, the disallowance made by applying Rule 8D is not only against the statutory mandate but contrary to legal principles laid down in the judicial precedents referred to above. In the aforesaid view of the matter, the disallowance made by the AO and partly sustained by the CIT(A) would have no leg to stand. Accordingly, the addition made deserves to be deleted. However, the disallowance made u/s. 14A by the assessee itself is also required to be disallowed while computing the book profit u/s. 115JB in view of the decision of the Tribunal in assessee's own case for A.Ys. 2005-06 to 2010-11 as referred to above. In view of our aforesaid decision, the other propositions raised by the assessee challenging the disallowance u/s. 14A are not required to be gone into. The grounds raised are partly allowed. 16. ITA 4321/Mum/2015 The only issue raised by the department is in relation to the deletion of addition made on account of interest expenditure u/s. 14A read with Rule 8D(2)(ii). As discussed earlier, the AO while completing the assessment had computed disallowanc....