Case Law Details
DCB Bank Ltd. Vs Asstt. CIT (ITAT Mumbai)
we find that the assessing officer has not recorded the satisfaction as to how the claim of the assessee is wrong with reference to the books of account of the assessee. We are therefore convinced with the submissions of the assessee on this score and are in agreement with the arguments of the learned Authorised Representative that for the invocation of provisions of section 14A read with rule 8D is not mandatory unless and until the assessing officer has recorded his satisfaction. The case of the assessee finds support from the decision of the Honb’le High Court rendered in Godrej and Boyce (supra), wherein it has been held that for invocation of provisions of section 14A, the assessing officer has to record satisfaction. We, therefore, respectfully following the ratio laid down in the above decision by the jurisdiction High Court, set aside the order of the learned Commissioner (Appeals) and direct the assessing officer to delete the addition.
FULL TEXT OF THE ITAT JUDGMENT
These cross-appeals are directed against the order 5-10-2015 passed by the learned Commissioner (Appeals)-6 for the assessment year 2011-12.
I.T.A. No. 249/Mum/2016
2. The first grounds of appeal taken by the revenue is in general nature, therefore, dismissed as not pressed.
3. In the second ground, the revenue raised the issue of allowing depreciation on leased out assets, when the related transactions were purely financial transactions.
4. At the outset, the learned Authorised Representative submitted that the issue raised by the revenue in second ground of appeal stands covered by the decision of the co-ordinate Bench in assessee’s own case in ITA No. 615/Mum/2014 (AY-2010-11) order dated 4-11-2015 and therefore by applying the same analogy, the issue be decided in favour of the assessee and the ground raised by the revenue be rejected.
5. The learned Departmental Representative fairly agreed with the contentions raised by the assessee.
6. After considering the rival submission and on perusal of material placed before us including the order of the Tribunal (supra) in assessee’s own case, we find that the issue stands covered in favour of the assessee. For the sake of ready reference, we reproduce the findings of the Tribunal order as under :–
“17. We find that the matter in the assessment years mentioned hereinabove travelled upto the Tribunal and the Tribunal by a consolidated order mainly in ITA Nos. 3006/M/01 and 4892/M/03 and ITA No. 3620/M/01 alongwith other appeals order dated 20-3-2013 has held at para-34 as under :–
“After having examined all the transactions which have been impugned before us, we are of the opinion that the assessee is entitled for the claim of depreciation under all the three circumstance i.e. Sale lease back, genuineness of transaction and asset having being put to use. We, therefore, allow ground No. 1 of the assessee’s appeal and dismiss both the grounds of the department’s appeals.”
11. As the assessing officer has followed the findings given in earlier assessment year and as the disallowance have been deleted by the Tribunal in earlier assessment years vide its order (supra), we do not find any reason to interfere with the findings of the learned Commissioner (Appeals). Ground No. 1,2 & 3 are accordingly dismissed.”
We are, therefore, maintaining consistency with the earlier year by following the same precedent as laid down by the Co-ordinate Bench of the Tribunal in assessee’s own case (supra) by dismissing the ground raised by the revenue.
7. The grounds of appeal no.3 taken by the revenue is with regard to the holding of broken period interest as not a part of the cost of securities and should not have been allowed as deduction.
8. We also find that the issue raised by the revenue is covered in favour of the assessee by the decision rendered by the Tribunal in assessee’s own case in ITA No. 820/Mum/2014 (AY-2010-11) vide order dated 4-11-2015 and therefore the learned Authorised Representative prayed that by applying the said decision, the issue be decided in favour of the assessee and the ground raised by the revenue be rejected.
9. The learned Departmental Representative fairly agreed with the contentions raised by the assessee.
10. After considering the rival submissions and on perusal of material placed before us including the order of the Tribunal (supra) in assessee’s own case, we find that the issue stands covered in favour of the assessee by the decision in ITA No. 820/Mum/2014, dated 4-11-2015 by following the decision of the jurisdictional High Court rendered in the case of American Express International Banking Corporation reported in 258 ITR 601(Bom). The relevant part of the judgment is reproduced below (ITA No. 820/M/2014, para 9.2 to 12) :–
“9.2. After considering the detailed submissions made by the assessee, the assessing officer was of the opinion that on identical set of facts, the department has not accepted the claim in the case of HDFC Bank, therefore, the same is also not accepted in the case of the assessee. Broken period interest was added to the total income of the assessee.
10. The assessee carried the matter before the learned Commissioner (Appeals) but without any success.
11. Before us, the learned Counsel for the assessee straightaway drew our attention to the decision of the Hon’ble High Court of Bombay in the case of HDFC Bank Ltd. 366 ITR 505 wherein question No. B read as under :–
(B) Whether the Income Tax Appellate Tribunal was correct in law in holding that the broken period interest is allowable as a deduction, in spite of the hon’ble Supreme Court’s decision in the case of Vijaya Bank Ltd. v. Addl. Commissioner (1991) 187 ITR 541(SC) and the Rajasthan High Court’s decision in the case of CIT v. Bank of Rajasthan Ltd. (2009) 316 ITR 391?
11.1. The Hon’ble High Court answered the question as under :–
Even as far as question (B) is concerned, we find no infirmity in the orders passed by the Commissioner (Appeals) or the Income Tax Appellate Tribunal. In deciding this issue, the Commissioner (Appeals) and the Income Tax Appellate Tribunal have merely followed the judgment of this court in the case of American Express International Banking Corporation v. CIT in (2002) 258 ITR 601 (Bom). On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr. Suresh Kumar is squarely answered by the judgment of this court in the case of American Express International Banking Corporation (supra). In view thereof, we do not find that even question (B) gives rise to any substantial question of law that needs to be answered by this court.
12. As the issue has been decided in favour of the assessee and against the Revenue, we set aside the findings of the learned Commissioner (Appeals) and direct the assessing officer to delete the addition of Rs. 11,50,42,776 in the light of the decision in the case of HDFC Bank (supra). Ground No. 2 is accordingly allowed”
12. Resultantly, the appeal of the revenue is dismissed.
ITA No. 5706/Mum/2015.
13. The only issue raised by the assessee is against the confirmation of disallowance of Rs. 7,15,836 by the learned Commissioner (Appeals) as made by the assessing officer under section 14A read with rule 8D of the Act and Rules respectively.
14. Brief facts of the case are that the assessing officer during the course of assessment proceedings, observed that the assessee has earned exempt income of Rs. 3,93,500 and suo motto disallowed only Rs. 22,302 as expenses relating to earning exempt income. The assessing officer was not convinced with the same and issued show cause notice to the assessee as to why the disallowance should not be worked out in terms of the provisions of section 14A read with rule 8D of the rules and accordingly disallowed an amount of Rs. 7,37,488 comprising of Rs. 6,72,098 under rule 8D(2)(ii) of the rules and Rs. 65,390 under rule 8D2(iii) of the rules and added the same to the total income of the assessee after allowing the deduction therefrom of suo-motu disallowance of Rs. 22,303 and accordingly, added a sum of Rs. 7,15,186 to the total income of the assessee. In the appellant proceedings, the learned Commissioner (Appeals) upheld the disallowance after considering the contentions of the assessee by observing as under (5.2 of appellate order):–
“5.2 I have carefully considered the facts of the case and the submissions of the learned Authorised Representative I have also gone through he decision relied on by the assessing officer and learned Authorised Representative. I find that the same issue had come up for consideration before the learned Commissioner (Appeals)-6 in appellant’s own case for the immediately preceding assessment year 2010-11. The submissions made by the appellant is also similar. After duly considering the submission of the appellant, the learned Commissioner (Appeals) in Appeal No. Commissioner (Appeals)-6/IT-108/Rg-2(3)/12-13 dated 21-10-2013 has held after detailed discussion in para 5.3, 5.4 and 5.5 that disallowance has to be computed as per rule 8D. In doing so, he has relied on the decision of the Hon’ble Bombay High Court in the case of Godrej and Boyce Mft Co. Ltd. (supra) that rule 8D is applicable from assessment year 2008-09 onwards. However, he allowed claim of Rs. 5,27,908 disallowed under rule 8D(2)(i). No such disallowance has been made by the assessing officer in this year i.e. disallowance under rule 8D(2)(i) is nil. Hence, following the above decision of the learned Commissioner (Appeals)-6 for assessment year 2010-11, the disallowance is upheld and the ground is dismissed.”
15. We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below. The learned Authorised Representative submitted that on the issue of disallowance under section 14A read with rule 8D, no satisfaction has been recorded by the assessing officer which is mandatory and are to be recorded with reference to the claim of the assessee as to how the said claim is not correct and liable to be rejected. The learned Authorised Representative also by relying on the decisions of the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. v. DCIT (2010) 328 ITR 81 submitted that provisions of section 14A read with rule 8D can not be invoked without recording the satisfaction by the assessing officer as to how the claim of the assessee is wrong having regards to the accounts of the assessee and thus the recording of satisfaction by the assessing officer is a pre-condition for the same. Alternatively, the learned Authorised Representative submitted that the assessee’s own interest free funds are for more than the investments yielding the tax free income and therefore the provisions of section 14 and rules 8D 2(ii) were wrongly invoked. The second alternative plea of the learned Authorised Representative was that all the investments in securities yielding the tax free income was held as stock in trade and therefore no disallowance was called for.
16. On the other hand, the learned Departmental Representative while opposing the arguments of the learned Authorised Representative submitted that the assessing officer has duly recorded due satisfaction while involving the provisions of section 14A read with rule 8D.The learned Departmental Representative submitted that it is mandatory to apply the provisions of section 14A rule 8D from assessment year 2008-09 and the was correctly applied by the assessing officer and affirmed by the Commissioner (Appeals). The learned Departmental Representative further stated that even if the shares are held as stock in trade the dividend income was exempt and disallowance has to be made.
17. Having considered the rival submissions and on perusal of the record, we find that the assessing officer has not recorded the satisfaction as to how the claim of the assessee is wrong with reference to the books of account of the assessee. We are therefore convinced with the submissions of the assessee on this score and are in agreement with the arguments of the learned Authorised Representative that for the invocation of provisions of section 14A read with rule 8D is not mandatory unless and until the assessing officer has recorded his satisfaction. The case of the assessee finds support from the decision of the Honb’le High Court rendered in Godrej and Boyce (supra), wherein it has been held that for invocation of provisions of section 14A, the assessing officer has to record satisfaction. We, therefore, respectfully following the ratio laid down in the above decision by the jurisdiction High Court, set aside the order of the learned Commissioner (Appeals) and direct the assessing officer to delete the addition. Resultantly, the appeal of the assessee stands allowed.
18. In the result, the appeal of the revenue is dismissed and that of assessee is allowed.
Kindly update the date of order. Its 24th November, 2017.