TaxTMI 
TaxTMI 
2018 (4) TMI 2015
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.... 61,90,287/- and brought to tax an amount of Rs. 39,34,633/- in addition to the amount of Rs. 22,54,654/- disallowed by the assessee suo-moto under section 14A. 4. Aggrieved the assessee filed the appeal before the Ld. CIT(A), who deleted the addition based on the judgment of Coordinate Bench of ITAT Chandigarh in the assessee's own case for the Assessment Year 2008-09. 5. Before us the Ld. DR submitted the arguments in the written form which are as under and prayed that the disallowance may be upheld: 1. S. 14A has been amended by introduction of sub section (2) and (3) and rule 8D w.e.f. A.Y. 2008-09. The amended provision of 14A states that if the AO is not satisfied with the correctness of assessee's claim in respect of expenditure in relation to exempt income or where an assessee claims that no expenditure has been incurred in relation to exempt income, then rule 8D(2) is mandatory and shall be invoked to determine such expenditure relatable to earning exempt income. Rule 8D(2)(ii) pertains to determination of interest expenditure in case of mixed funds. Rule 8D(2)(ii) leaves no scope for presumption as a mathematical formula has been prescribed. Various cou....
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....For instance, if the assessee claims that he has not incurred any interest expenditure but has incurred administrative expenses or vice-versa and the Assessing Officer disagrees with either claim, Rule 8D cannot be applied only in respect of any particular clause of sub-rule (2) of Rule 8D. He must then determine the amount of expenditure incurred in relation to exempt income in accordance with Rule 8D. 48- 49. In the circumstances, questions (i) and (ii) are answered in favour of the respondent-revenue. It is agreed that the computation under Rule 8D shall be carried out in the first instance by the Assessing Officer. Needless to add that the parties are always at liberty to question the same in accordance with law. Question (iii) is answered as per the clarification furnished by us above." (ii) Hon'ble Punjab and Haryana High Court decision in the case of Avon Cycles Ltd vs CIT, in ITA No. 227 of 2013 dated 20/08/2014 for A.Y. 2008-09. In this case the Hon'ble High Court upheld the disallowance of interest expenditure computed as per rule 8D(2)(ii) for mixed funds. The Hon'ble High Court distinguished the decision of Bombay....
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....iven situation, any expenditure was incurred which was to be disallowed, it is a question of fact........................... " In the present case, after examining the balance-sheet of the assessee, a finding of fact has been recorded that the funds utilized by the assessee being mixed funds, therefore, the interest paid by the assessee is also an interest on the investments made. Such being a finding of fact, we do not find that any substantial question of law arises for consideration of this court." It is being argued that the decision of Avon Cycle is not relevant as Hon'ble Punjab & Haryana High Court in later judgement in the case of CIT vs Max India 110, ITA No. 186 of 2013 dated 06/09/2016 has upheld the principle of presumption in case of mixed fund. In this regard it is submitted decision of Max India pertaining to A.Y. 2002-03 and is hence not applicable to the present facts. (iii) Hon'ble ITAT Chandigarh decision in the case of Munjal Sales Corporation vs ACIT in ITA No. 274/Chd/2015 dated 07/07/2015 for A.Y. 2009-10 Hon'ble ITAT has held that the amendment to S 14A and rule 8D is prospective and that judgements rendered fo....
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.... a mandate to apply the formulae as it were under Rule 8D because of Section 14A(2). If in a given case, therefore, the AO is confronted with a figure which, prima facie, is not in accord with what should approximately be the figure on a fair working out of the provisions, he is but bound to reject it. In such circumstances the AO ordinarily would express his opinion by rejecting the disallowance offered and then proceed to work out the methodology enacted." 2. The next issue is regarding the satisfaction of the AO as per S 14(2) and (3). In this respect various courts have held that the law does not envisage express recording of satisfaction. Reliance is placed on following case laws. (i) Hon'ble Delhi High Court decision in the case of India bulls Financial services (supra). The relevant extract is as under: "8. In this instance the elaborate analysis carried out by the AO - as indeed the three important steps indicated by him in the order, shows that all these elements were present in his mind, that he did not expressly record his dissatisfaction in these circumstances, would not per se justify this Court in concluding that he was not satisfied or ....