TaxTMI 
TaxTMI 
2018 (3) TMI 425
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....sessee in the appeal reads as under : "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in : 1. not appreciating the fact that dividend received on investments in group companies should be excluded while computing disallowance u/s.14A (Refer Para 3.8 of the order u/s.250). 2. confirming disallowance of Rs.17,817/- being contribution to Group Gratuity Scheme." 4. Assessee has also raised an additional ground, which is legal in nature, and the same is extracted here as under : "Ld.CIT(A) failed to appreciate the fact that disallowance u/s.14A made by the AO in the assessment order passed u/s.153C r.w.s. 143(3) of the Act is not sustainable in the non-abated assessment as there was no incriminating material found during search ignoring the decision in the case of "All Cargo Global Logistics Ltd. Vs. DCIT 147 TTJ 513 (Mum) (SB) and the decision of Bombay High Court reported at 58 Taxmann.com 78 of CIT-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd." 5. Before us, and at the outset, Ld. AR for the assessee submitted that validity of the additions raised in the additional ground, which is legal and g....
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....ect to the said direction of the ITAT. 8. While the disallowance u/s.14A of the Act is the bone of contention in the regular assessment, the same addition is repeated by the AO in the search assessment made u/s.153C of the Act. Further, referring to the additional ground which is legal in nature, Ld. AR for the assessee submitted that such additions are not legally sustainable in this case of a non-abated assessment when there is no seized material or incriminating material to backup the same. In this regard, Ld. AR brought our attention to various decisions to support his arguments. The decision of Special Bench in the case of All Cargo Global Logistics Ltd. 147 TTJ 513 (Mum) (SB) and the decision of jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. reported in 58 taxmann.com 78 were heavily relied by the Ld. AR for the assessee. He also relied on the Pune Bench decision in of the group cases, i.e. the case of Serum Institute of India Ltd. for the A.Y. 2008-09 vide ITA No. 1183 and 1537/PUN/2015, order dated 28-11-2017 and submitted that the present additional ground raised by the assessee should be allowed deleting the addition mad....
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....ting that such addition is unwarranted and unsustainable in the non-abated assessments made u/s.153C of the Act. According to the Ld. AR for the assessee, the addition is made without having any the support of any incriminating material. 14. Before us, on merits, Ld. AR for the assessee submitted that the said Group Gratuity Scheme has not been approved till date. Notwithstanding the same, Ld. AR submitted that the AO is not empowered to assume jurisdiction u/s.153C of the Act in this case of non-abated assessment. It is a settled legal position in the matter. 15. We find the arguments of Ld. AR are sustainable legally. As such, nothing contrary is brought to our notice by the Ld. DR for the Revenue. Further, perusal of the orders of the Revenue does not indicate the existence of any incriminating material linking to the said claim of the assessee. We find the contents of Para No.7 of the AO and Para Nos. 3.11 and 3.12 of the order of CIT(A) are relevant. Considering the same, we are of the view that this issue also should be decided in favour of the assessee. Accordingly, Ground No.2 raised by the assessee is allowed. 16. In the result, appeal of the assessee is partly al....
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....owing grounds of appeal in this appeal : "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in : 1. confirming the disallowance of a sum of Rs.51,61,884/- u/s.14A by applying Rule 8D. 2. not granting set off of the amount offered towards contingency of Rs.60,00,000/- against disallowance u/s.14A (Refer Para 6.26 of CIT(Appeals)'s order. 3. confirming disallowance of Rs.40,772/- being contribution to Group Gratuity Scheme. 4. confirming the disallowance of PMS (Portfolio Management Scheme) Fees of Rs.17,15,457/- from the sale consideration of shares while computing capital gains. Similar grounds have been raised by the assessee for A.Yrs. 2010-11 and 2011-12. 25. Assessee has also raised an additional ground and the same is extracted as under : "Additional Ground of appeal No.2(b) - Alternatively, the Ld.CIT(A) ought to have granted relief by reducing the total income assessed by Rs.60,00,000/- being the contingency offered to tax in return of income as no evidence was found during the course of search and/or in assessment proceedings regarding undisclosed income. With this as additio....
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....rt and the Para No.37 of the judgment of Hon'ble Apex Court in the case of Godrej and Boyce Manufacturing Company Ltd. (supra) are relevant. Hon'ble Supreme Court explained the provisions of sub-section (2) and (3) of section 14A of the Act. For the sake of completeness, we proceed the extract the same here as under : "37. We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002-03. Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. 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 asses....
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.... the explanation of assessee and holds that the contention of assessee cannot be accepted. The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC). "37. We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002-03. Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. 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 Asse....
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....t give said set off of benefit of said Rs. 60 lakhs against the disallowance made by him in the search assessment. It is the claim of the assessee that said Rs. 60 lakhs is intended for set off against the disallowance, like the present one made by the AO u/s.14A of the Act. With these background facts, assessee raised Ground No.2 claiming that the disallowance made by the AO in the search assessment should have been accordingly reduced out of the said Rs. 60 lakhs with special reference to the disallowance u/s.14A of the Act. 35. Before us, Ld. Counsel for the assessee submitted that similar disallowance was made u/s.14A of the Act in the case of Adurjee & Brothers Pvt. Ltd. which belongs to the assessee's group of cases and the Tribunal allowed similar claim of set off in favour of the assessee. Further, Ld. AR for the assessee brought our attention to the decision of the Pune Bench of the Tribunal in the case of Serum Institute of India Ltd. Vs. DCIT in ITA Nos. 985 and 986/PUN/2015 and ITA Nos. 1535 & 1536/PUN/2015, order dated 28-11-2017. Contents of Para No.28 to 41 of the order of the Tribunal are relevant. 36. After hearing both the sides on this issue and on perusal ....
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....he question of set off does not arise as we have already granted relief to the assessee on legal issue relating to the recording of satisfaction before invoking the provisions of section 14A of the Act r.w. Rule 8D(2) of the I.T. Rules. The Ground No.2/Additional Ground No.2(a) becomes academic. 38. Regarding the Additional Ground to be re-numbered as 2(b), Ld. AR submitted that the assessee's request is for reduction of returned loss by Rs. 60 lakhs offered by the assessee during the search & seizure proceedings. 39. Before us, regarding the issue of admission of the said additional ground relating to the reduction of returned loss, Ld. AR submitted that the said ground being legal in nature needs to be admitted. He also submitted that there is no need for investigation into the facts. 40. Per Contra, Ld. DR for the Revenue strongly objected to the admission of the said additional ground raised by the assessee during the second appeal proceedings. According to him, the adjudication of this ground requires investigation into certain facts. Detailing the said investigation, Ld. DR submitted that there is need to examine the manner of disclosure of Rs. 60 lakhs given by the ....
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....of the opinion that the order of CIT(A) on this issue is fair and reasonable as the scheme has not been approved till date, as admitted by the Ld. AR for the assessee. Hence, it does not call for any interference on this issue. Accordingly, Ground No.3 raised by the assessee is dismissed. 45. Ground No.4 raised by the assessee relates to the confirmation of disallowance of Portfolio Management Fees of Rs. 17,15,457/-. 46. Ld. Counsel for the assessee submitted that this issue is identical to the one already discussed and adjudicated by the Tribunal in assessee's favour in the case of Serum Institute of India Ltd. (supra) order dated 28-11-2017. 47. After hearing both the parties on this issue and considering the settled nature of the issue, we proceed to extract the finding of the Tribunal here as under: "59. After hearing both the sides on this issue, we perused the order of the Tribunal in assessee's own case for A.Y. 2007-08. We find the Tribunal in Para Nos. 12 and 12.1 of the order has decided this issue in favour of the assessee relying on the order of Tribunal in the case of KRA Holding and Trading Investment Pvt. Ltd. (supra). We proceed to extract the ope....