TaxTMI 
TaxTMI 
2023 (9) TMI 1230
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....of bank notes, minting of coins, medallion seals and tokens etc, filed its return of income for the Assessment Year 2014-15 on 09.10.2014, declaring its income to be Rs. 512,53,01,630/-. 2.2 The case of the respondent/assessee came under scrutiny and the Assessing Officer passed Assessment Order dated 19.12.2016 under Section 143(3) of the Act, thereby assessing the concerned income to be Rs. 518,41,94,170/- after making additions to the tune of Rs. 1,92,91,622/- on account of disallowance made under Section 14A of the Act and a further amount to the tune of Rs. 3,96,00,919/- on account of Corporate Social Responsibility (CSR) expenses claimed by the assessee. 2.3 The respondent/assessee challenged the said Assessment Order before the Commissioner Income Tax (Appeals) [CIT (A)], but the said appeal of the respondent/assessee was dismissed vide order dated 05.10.2018, thereby upholding the additions made by the Assessing Officer. 2.4 However, the respondent/assessee succeeded before the Tribunal in the second appeal. Placing reliance on its earlier decisions in the case of the respondent/assessee for the Assessment Years 2012-13 and 2013-14, the learned Tribunal allowed the....
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....resent appeal, the learned Tribunal, expressing concurrence with their earlier orders pertaining to the respondent/assessee for the Assessment Years 2012-13 and 2013-14 held that the CSR expenses incurred by the respondent/assessee are not in the nature of personal expenditure or for violation of law and the same could not be held to be capital, therefore, the impugned disallowance of CSR expenses was liable to be deleted. 3.5 As regards the disallowance under Section 14A of the Act, the learned Tribunal, referred to their earlier orders pertaining to the Assessment Year 2011-12 when similar disallowance was deleted, observing that the investment advisors were managing the funds concerned without any cost to the assessee and there was no direct or indirect expense on account of establishment, audit fees or otherwise incurred qua operation of the said funds, as the dividend was being automatically reinvested in the plan by the UTI on the basis of instructions of the assessee. The learned Tribunal in that regard also referred to their earlier order pertaining to the year 2012-13, whereby the disallowance under Section 14A of the Act was deleted because while invoking the disallowa....
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....sing Officer had not recorded his express dissatisfaction with regard to the disallowance made under Section 14A of the Act, it would not ipso facto be considered to be that the Assessing Officer was not satisfied or did not have cogent reasons for his dissatisfaction. Learned counsel for appellant/revenue strongly contended that it is natural and obvious that certain expenditure in the nature of administrative and other expenses would have certainly been incurred by the respondent/assessee for maintaining such assets. 5.2 Per contra, learned counsel for respondent/assessee supported the impugned order and contended that the appeal is completely devoid of merit. Learned counsel for respondent/assessee, at the outset, contended that the issue involved in the present case stands already covered by an earlier judgment of this court in the case of Coforge Limited (formerly known as NIIT Technologies Ltd) vs ACIT, ITA 213/2020, decided on 09.04.2021. Learned counsel for respondent/assessee contended that where the subject expenditure has no causal connection with the exempted income, such expenditure would obviously be treated as not related to the income that is exempted from tax an....
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....) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under Section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under Section 154, for any assessment year beginning on or before the 1st day of April, 2001." (emphasis is ours) 6.1 In the case of HT Media Ltd (supra), relied upon by learned counsel for appellant/revenue, unlike the present case (where the respondent/assessee took a specific and reasoned stand having not spent any expenses coverable under Section 14A of the Act), the respondent/assessee took a stand having incurred some negligible indeterminate expenses pertaining to the exempt income and it was under these circumstances that the Assessing Officer invoked Rule 8D(2)(iii) and recomputed the expenses at higher amount. The Assessing Officer in the said case, unlike the present case, did not....
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.... total income, if the AO is not satisfied, having regard to the accounts of the assessee, as to the correctness of claims made by the assessee about such expenditure. 12.8. Sub-section 3 of Section 14A of the Act makes it clear that the parameters stipulated in the said provision will also apply where the assessee claims that no expenditure has been incurred by him concerning income that doesn't form part of the total income under the Act. 13. Therefore, what emerges is, if the assessee claims a certain amount of expenditure was incurred by him to earn the income which does not form part of the total income, the AO is required to examine the accounts, and thus, satisfy himself as to the correctness of the claim made by the assessee about the expenditure incurred in that regard. It is when an AO is not satisfied as to the correctness of the claim made by the assessee, about the expenditure said to have been incurred by him on such income which does not form part of the total income under the Act, he then proceeds to determine the amount of expenditure, by following such method as is prescribed, i.e., Rule 8D of the Rules. 13.1. This methodology, as envisag....
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....artered Accountants of India Reference Manual 2022-23]. 8. Like any other claim under the Act, the acceptance of assessee's claim qua the disallowance under Section 14A of the Act is subject to satisfaction of the Assessing Officer and that satisfaction has to be on the basis of scrutiny of accounts of the assessee. According to Section 14A of the Act, if the Assessing Officer, having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure qua the exempt income, he shall determine the amount of expenditure incurred in relation to the exempt income in accordance with the method prescribed in that regard and this principle also applies to the cases where the assessee contends that no expenditure has been incurred in relation to earning of exempt income. 9. For effectuating the provisions under Section 14A of the Act, Rule 8D was framed in the Income Tax Rules in the year 2008, operable from Assessment Year 2008-09. In the year 2016, Rule 8D was amended, operable from Assessment Year 2017-18. For present purposes, the relevant portion of Rule 8D is extracted below: "8D. Method for determini....
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....can take resort to the method prescribed in Rule 8D of the Rules. 11. In the case of Godrej & Boyce Manufacturing Co. Ltd. (supra), the Hon'ble Supreme Court examined the provisions under Section 14A of the Act and Rule 8D of the Rules as well as the mandate of consistency in decision making vis a vis the doctrine of res judicata in detail, concluding thus: "38. In the present case, we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the Assessment Year 2002-2003, to hold that the claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances. Neither any basis has been disclosed establishing a reasonable nexus between the expenditure disallowed and the dividend income received. That any part of the borrowings of the assessee had been diverted to earn tax free income despite the availability of surplus or interest free funds available (Rs. 270.51 crores as on 1.4.2001 and Rs. 280.64 crores as....
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....he Assessing Officer, to a certain extent, aptly observed that Section 14A(2) of the Act empowers (rather, it enjoins a duty upon) the Assessing Officer to determine the expenditure in relation to income not forming part of total income if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in regard to such expenditure. The Assessing Officer further observed: "It is obvious that certain expenditure of the nature of administrative and other expenditures are bound to be have been incurred by the assessee simply for the reason that the assessee is maintaining such assets, in this case being units of mutual funds and shares of the joint venture company, which has yielded or can yield incomes which does not form part of total income" (emphasis is ours). The Assessing Officer proceeded to hold: "some expenditures such as those incurred on man-hours spent on maintenance of accounts of such investments, man-hours spent on reconciliation of such investments, documentation, stationery, computer resources, accounting software etc. are attributable to the fact that the assessee is having such assets in its balance sheets". Similarly, t....