TaxTMI 
TaxTMI 
2020 (8) TMI 99
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....ircumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the disallowance made by the Assessing Officer under Section 14A of the Act in the absence of any cogent satisfaction for disregarding the voluntary disallowance made by the appellant ? 4. The assessee, which is a manufacturing company, filed its return of income on 30.9.2009 for the assessment year 2009-10 admitting a total income of Rs. 2,00,46,53,580/-. The return was processed under Section 143(1) of the Act. Subsequently, a revised return was filed on 28.3.2011 declaring a total income of Rs. 2,02,56,55,520/- and the same was processed on 31.3.2012. A demand of Rs. 91,86,31,420/- was raised. In the meanwhile, the case was selected for scrutiny and a notice under Section 143(2) of the Act dated 23.8.2010 was issued to the assessee. 5. The Assessing Officer, among other issues, considered the disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (for short, the Rules). The assessee held investments in shares and mutual funds to the tune of Rs. 1,32,39,84,480/- and earned a dividend income to the tune of Rs. 11,48,08,342/- from such investments and clai....
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....o disallowance under Section 14A of the Act. 9. The Tribunal considered the submissions of the assessee and found that the disallowance as computed by the Assessing Officer by applying the formula under Rule 8D(2)(iii) of the Rules did not call for any interference. Ultimately, both the appeal filed by the Revenue as well as the cross objection filed by the assessee stood dismissed by the impugned order dated 20.3.2018. As against the order of dismissal, the assessee alone is before us. 10. The questions to be decided by us in this appeal are as to whether the disallowance made by the Assessing Officer was proper and as to whether the assessee was right in contending that there were no cogent reasons recorded by the Assessing Officer with regard to his satisfaction as to the correctness of the voluntary disallowance made by the assessee. 11. Both the learned counsel appearing for the assessee have drawn the attention of this Court to the findings recorded by the Assessing Officer, the CIT(A) and the Tribunal and submit that the satisfaction of the Assessing Officer has to be objectively arrived at on the basis of the accounts and after considering all the relevant facts and circ....
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....A(2) of the Act in regard to the assets of the assessee and with regard to the correctness of the claim made by the assessee in respect of such expenditure in relation to income, which does not form part of total income. 16. To explain the subtle difference between satisfaction to be recorded by the Assessing Officer under Section 14A(2) of the Act and satisfaction to be recorded under Section 145(3) of the Act as quite distinct, Section 145(3) of the Act is referred to. It is submitted by the learned Senior Standing Counsel appearing for the Revenue that the decisions relied upon by the learned counsel appearing for the assessee would not apply to the facts of the case, because, in those cases, the Assessing Officer straight away resorted to the computation machinery provided under Rule 8D of the Rules without recording satisfaction under Section 14A(2) of the Act whereas in the case on hand, the Assessing Officer recorded satisfaction, which has been confirmed by the CIT(A) as well as the Tribunal and therefore, there is no error in the decision making process by the Assessing Officer or the decision itself. With the above submissions, the learned Senior Standing Counsel appeari....
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....lance sheet as on 31.3.2009, the total value of assets is Rs. 514,25,32,150/-, out of which, investments are held to the tune of Rs. 132,39,84,480/-. Considering the volume of investments held by the assessee and the amount of exempted income earned out of it and the management skill required to maintain such investment portfolio, the quantum of expenditure computed by the assessee is not acceptable. Further, the assessee incurs routine expenditure to maintain its establishment and towards administration, a portion of which can be attributed towards the activity of earning dividend. The assessee also incurs managerial remuneration and claims the whole of the same as an expenditure. The managerial staff and the directors are involved in making decisions on investments. Such being the case, a portion of this managerial remuneration and directors remuneration should also be attributed towards the dividend earning activity by the assessee." 22. The Assessing Officer noted the details, which obviously have been culled out from the books of accounts and other records placed by the assessee namely that (i) the assessee was not in the business of investment in shares; (ii) more than 1/3rd....
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....jab and Haryana High Court cited by the assessee in the case of CIT Vs. Hero Cycles Ltd. [reported in 189 Taxman 50] was distinguished; so also the decision of the Chennai Bench of the Tribunal of in the case of Allied Investments Housing P. Ltd. Vs. DCIT [ITA.No.305/Mds/2013] and it was held that the Assessing Officer recorded reasons and the sum disallowed in comparison to the investment was not adequate. 26. The other decisions of the Delhi Bench of the Tribunal in the case of Minda Investments Ltd. Vs. DCIT [ITA.No.4046/Del/ 2009] and in the case of DCIT Vs. Jindal Photo Ltd. [ITA.No. 814/2011] were also distinguished. By referring to the decision of the Chennai Bench of the Tribunal in the case of Visual Graphics Computer Services India (P) Ltd. [reported in (2012) 21 Taxmann.com 145], the CIT(A) held that no income was gratuitous, that every income was earned after incurring certain expense and that a reasonable portion of management expenditure should be attributed to earning of dividend income. The CIT(A) also referred to the decision of the Chennai Bench of the Tribunal in the case of Southern Petrochemical Industries Vs. DCIT [reported in 93 TTJ (Chennai) 161] wherein it....