TaxTMI 
TaxTMI 
2021 (12) TMI 821
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....illed in terms of law explained by the Hon'ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset Management Ltd. reported as 86 taxmann.com 200. 4. The CIT(A) erred in allowing the claim of the assessee u/s.80IC on income earned from sale of scarp when it was not derived from the activities of the eligible business. 5. The CIT(A) erred in allowing the claim of the assessee u/s.80IB/80IC on sale of scrap, relying on the decision of the Hon'ble Madras High Court in the case of M/s. Fenner India Ltd. (241 ITR 893) which has been rendered without taking into consideration various decisions of Hon'ble Apex Court on this issue like CIT Vs. Sterling food (1999) 237 ITR 579 when it was not derived from the activities of the eligible business. 6. The CIT(A) erred in ignoring the decision of Hon'ble Supreme Court in the case of Liberty India Vs. CIT (2009) 317 ITR 218 (SC) wherein the words derived from as used in Sec.80IB of the Income Tax Act, 1961. 7. For these and such other reasons as may be urged at the time of hearing the order of the CIT(A) may be vacated and that of the Assessing Officer be restored....
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....be satisfied. However, the Ld. AO has not at all recorded his satisfaction under Rule 8D(1). Hence, Rule 8D is not applicable. In this connection, we also invite your attention to the orders of the Hon'ble ITAT for the AY. 2003-04, AY 2004-05, AY 2005-06, AY 2006-07, AY 2007-08, AY 2008-09, AY 2009-10, AY 2010-11, AY 2011-12 wherein the Hon'ble ITAT deleted the disallowance. In these years also the appellant had suo-motu disallowed the amounts under section 14A. Further we invite your attention to the following case laws: • CIT Vs. Ultra Tech Cement Ltd. (2018) 407 ITR 500 ( Bom.) (HC) • Godrej and Boyce Manufacturing Co. Ltd. Vs. DCIT, 328 ITR 81 • H.T Media Ltd. Vs. PCIT (Del.) (HC) • Pr. CIT Vs. Reliance Capital Asset Management Ltd. (Bom.) (HC) It is therefore prayed that the addition made may kindly be deleted and this ground of appeal be allowed." 6. The Ld. CIT(Appeals) after considering the submissions of the assessee and the assessment order has held and observed as follows: "FINDINGS : 2.3. I have carefully considered the facts of the case and submission filed by the appell....
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....,640/- 2,55,400/- 1,17,74,029/- 2009-10 12,52,22,953/- 3,02,550/- 1,61,02,610/- 2010-11 4,24,98,032/- 4,43,316/- 1,01,86,592/- 2011-12 13,56,23,646/- 5,28,048/- 1,18,34,013/- 6. The Assessing Officer made disallowance u/s. 14A by invoking the provisions of Rule 8D(2)(ii) and 8D(2)(iii). In first appeal the Commissioner of Income Tax (Appeals) deleted disallowance made under the provisions of Rule 8D(2)(ii) and confirmed disallowance under Rule 8D(2)(iii). The assessee in appeal before Tribunal has assailed the Assessing Officer's action of invoking the provisions of Rule 8D without recording satisfaction. 7. Before proceedings to decide this issue it would be relevant to first refer the relevant provisions of section 14A of the Act. "Expenditure incurred in relation to income not includible in total income. 14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expendi....
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....ons of sub-section (2) of section 14A. The Commissioner of Income Tax (Appeals) rejected the contentions of assessee by observing as under : "5.7. ..............The fact that the appellant had considered certain amount as disallowable does not come out from the appellant's submissions reproduced in the asst order. It appears from the asst order that before the AO the appellant assessee had claimed that no expenditure was incurred to earn the dividend income. The AO has discussed the issue of applicability of Rule 8D in great detail in his order. Thus the satisfaction of the AO regarding applying Rule 8D is there." To support his reasoning, the Commissioner of Income Tax (Appeals) placed reliance on the decision of Pune Bench of Tribunal in the 7 ITA Nos. 327 to 330/PUN/2016, A.Ys. 2008-09 to 2011-12 case of Lap Finance & Consultancy Pvt. Ltd. in ITA Nos. 1522 to 1525/PN/2013 decided on 06-11-2015. 10. We find that the Commissioner of Income Tax (Appeals) has erred in coming to conclusion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D. We further observe that reliance placed by the Commissioner of Income Tax (Appeals) on th....
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.... to place on record all the relevant facts including his accounts and recording of reasons by the AO in the event that he comes to the conclusion that he is not satisfied with the claim of the assessee:" 6. Thus no fault can be found with the impugned order of the Tribunal holding that the AO should show fallacies in the computation of disallowance done by the respondent-assessee. Thus, there is no reason to discard the disallowance done by the respondent-assessee." 13. The Hon'ble Jurisdictional High Court in a recent decision in the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset Management Ltd. reported as 86 taxmann.com 200 has held that where Assessing Officer has not commented upon the correctness or otherwise of the assessee's working of expenditure, formula prescribed in Rule 8D(2)(iii) could not have been applied to work out disallowance u/s. 14A. 14. Thus, in view of the facts of the case and the ratio laid down by Hon'ble Jurisdictional High Court, we are of considered view that the Assessing Officer has made disallowance u/s. 14 r.w. Rule 8D in violation of the provisions of sub-section (2) to section 14A. Hence, the disallow....
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....lowing the claim of the assessee u/s.80IB/80IC on sale of scrap, relying on the decision of the Hon‟ble Madras High Court in the case of M/s. Fenner India Ltd. (241 ITR 893). 11. The Pune Bench of the Tribunal in assessee‟s own case in ITA Nos.593 to 596/PUN/2016 for the assessment years 2008-09 to 2011-12 dated 21.12.2017 on this issue has held and observed as follows: "6. We have heard the rival contentions and perused the record. Briefly in the facts of the case the assessee had claimed deduction u/s. 80IB of the Act for Goa Unit in respect of sale of scrap. We find that similar issue of claim of deduction u/s. 80IB of the Act on sale of scrap generated out of manufacturing process was treated as business income and the deduction u/s. 80IB of the Act was allowed. The Tribunal in ITA Nos.564 & 565/PN/2014 relating to assessment years 2005-06 & 2007-08 in the appeal filed by the Revenue, with lead order in ITA No.360/PN/2014 relating to assessment year 2007-08 in the appeal filed by the assessee, vide order dated 31.08.2015 had held as under : "6. We have heard the submissions made by the representatives of both the sides and have examined the orde....