TaxTMI 
TaxTMI 
2020 (4) TMI 52
X X X X Extracts X X X X
X X X X Extracts X X X X
.... invoking the provisions of section 14A read with Rule 8D of the Income Tax Rules, 1962 without appreciating that the Ld. Assessing Officer failed to recording, any reason for nonsatisfaction with the correctness of the claim of Rs. 50,143/- suo-moto disallowed by the Appellant u/s. 14A and doing so is wrong & contrary to the facts of the case, provisions of the Act, and the Rules made thereunder. (b) The Id. CIT(A) ought to have restricted the disallowance u/s 14A to Rs. 50,143/- as computed by the appellant being fair and reasonable and correct claim having regards to accounts of the appellant company and not doing so is wrong and contrary to the provisions of the Act, and the Rules made there under. (c) Without prejudice to the above Grounds of appeal, the Ld. CIT(A) ought to have not reckoned those investments which have not generated any exempt income for the purpose of calculating average value of investments in terms of section 14A r.w.r. 8D(2) and not doing so is wrong and contrary to the provisions of the Act, and the Rules made there under. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Total salary debited to P/L 86,87,983 Ratio of Salaries 0.0025 Total salary to be disallowed 22,009 Direct Expenses: DMAT A/c. Maintenance Charges, DMAT Transfer charges etc. 18,254 Indirect Expenses: Ratio of Salary is applied to other indirect expenses: Other than those directly related to manufacturing, selling and distribution expenses Conveyance expenses 4,25,044 Electricity expenses 3,52,509 Infrastructural support services 5,10,275 Insurance expenses 71,927 Motor car expenses 3,23,508 Miscellaneous expense 26,090 Rent 16,82,000 Telephone expenses 1,30,387 Director's sitting fees 50,000 Printing & stationery 3,28,102 Total 38,99,842 Ratio 0.0025 Disallowance 9,880d Expenses pertaining to Investment dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted that the A.O had wrongly assumed jurisdiction and re-worked out the disallowance under Sec.14A r.w. Rule 8D at an amount of Rs. 10,94,782/-. Elaborating on his aforesaid contention, it was submitted by the ld. A.R that the A.O without recording his satisfaction as to why the disallowance under Sec. 14A offered by the assessee in its return of income was not to be accepted, had most erroneously dislodged the same. It was averred by the ld. A.R that as held by the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Limited Vs. DCIT (2017) 394 ITR 449 (SC) and Maxopp Investment Ltd. VS. CIT (2018) 402 ITR 640 (SC), the A.O as per the mandate of law was obligated to arrive at a satisfaction that having regard to the accounts of the assessee, as placed before him, it was not possible for him to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It was submitted by the ld. A.R, that the A.O only after arriving at the aforesaid satisfaction could thereafter take recourse to the provisions of Sec.14A(2) and (3) r.w. Rule 8D. On the basis of his aforesaid contention, it was vehemently submitted by the ld. A.R that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sue was covered by the order of the 'Special bench' of the ITAT in the case of ACIT Vs. Vireet Investments Pvt. Ltd. (165 ITD 27) (Del) (SB). 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. As observed by us hereinabove, the assessee had assailed before us the disallowance worked out by the A.O under Sec. 14A r.w. rule 8D. We shall first advert to the claim of the assessee that the A.O without recording his dissatisfaction as regards the correctness of the suo motto disallowance that was made by the assessee under Sec. 14A in its return of income, had most erroneously dislodged and substituted the same by an amount that was arrived at by him as per Sec.14A r.w Rule 8D. As observed by the Hon'ble Supreme Court in the case of Godrej & Boyce Manufacturing Company Limited Vs. DCIT (2017) 394 ITR 449 (SC), the A.O remains under a statutory obligation to arrive at a satisfaction that having regard to the accounts of the assessee, as placed before him, it is not possible for him to generate the requisite satisfaction with re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....computing the "average value" of such investments which had yielded exempt income during the year under consideration. It is the claim of the ld. A.R that the A.O while computing the disallowance under Sec. 14A r.w Rule 8D(2)(iii) had worked out the "average value" of the investments at Rs. 21,53,05,500/-, that also included certain investments which had not yielded any exempt income during the year under consideration. In our considered view, there is substantial force in the aforesaid claim of the ld. A.R that the investments which had not yielded any exempt income during the year under consideration ought to have been excluded for the purpose of computing the "average value" of the investments while computing the disallowance under Rule 8D(2)(iii). Our aforesaid view is fortified by the order of the 'Special bench' of the ITAT, Delhi in the case of ACIT Vs. Vireet Investments Pvt. ltd. (2017) 165 ITD 27 (Del) (SB). We find that the ld. A.R had furnished a 'chart' as per which the "average value" of the exempt income yielding investments would work at an amount of Rs. 4,27,46,110/-, as under : Sr. No. Name of the company Dividend Amount (in Rs.) Closing balance as on ....