Samvardhana Motherson International Ltd. Vs ACIT (Delhi High Court)
The chronology of events leading up to the passing of the orders under section 143(3) of the Act, clearly shows that the assessing officer was ‘satisfied with the claim of the assessee’ while passing the original orders. Rule 8D is triggered only in a case where the assessing officer is not satisfied with the deduction made by the assessee. The reasons to believe assume and are predicated on the belief that the assessing officer should not have accepted the Petitioner’s deduction as explained and justified, albeit should have applied rule 8D.
Rule 8D is triggered only in a case where AO is not satisfied with chronology of events leading up to the passing of orders under section 143(3), clearly showed that AO was ‘satisfied with the claim of the assessee’ as regards disallowance under section 14A while passing the original orders and reopening of assessment was based on mere change of opinion, hence invocation of rule 8D was beyond acceptance.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-
We with the consent of the parties have heard the arguments and the writ petitions are taken up for final disposal.
2. M/s. Samvardhana Motherson International Ltd. (formerly known as Samvardhana Finance Ltd.) has filed the present writ petitions impugning two notices dated 30-3-2015, issued by the Additional Commissioner, Circle 22(1), New Delhi under section 148 of the Income Tax Act, 1961 (‘the Act’ for short) relating to assessment year’s (‘AY’) 2010-2011 and 2011-2012.
3. The Petitioner has also placed on record a copy of the order dated 16-12-2015 passed by the assessing officer (‘AO’) disposing of objections of the Petitioner against reopening of assessments under section 147/148 of the Act on the ground of ‘change of opinion’.
4. The undisputed position is that the Petitioner company is engaged in the business of establishing subsidiaries, making majority or minority investments and/or to promote technical collaborations and to act as a holding company. The Petitioner in paragraph 4 of the petition has stated that the Petitioner company makes strategic investments.
Original Assessment proceedings for assessment year 2010-11.
5. For the assessment year 2010-2011, the return filed by the Petitioner company had disclosed dividend income of Rs. 20,48,37,585 which it claimed as exempt from tax under section 10(34) of the Act. The Assessee had disallowed expenditure amounting to Rs. 9,75,26,937 for earning the exempt income under section 14A of the Act for assessment year 2010-11.
6. The return was taken up for scrutiny assessment after issue of notice under section 143(2) of the Act. In terms of notice dated 16-5-2012 under section 142(1) of the Act, the Petitioner was required to furnish several details, including details of dividend income received, and details of expenses attributable for earning of this income. The aforesaid notice was followed by another notice dated 18-10-2012 by which the Petitioner was asked to give a detailed calculation of the disallowance under section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 (‘the rules’ for short).
7. In response to the first notice, the Petitioner filed a reply dated 12-6-2012 stating that it had received dividend income of Rs. 20,48,37,585 which was claimed as exempt under section 10(34) of the Act. In its subsequent reply dated 11-2-2013, the Petitioner submitted calculation of disallowance under section 14A read with rule 8D of the rules and computation of the disallowance made by them. For the sake of convenience, since counsels for both parties rely on the same, we would like to reproduce the aforesaid computation, which reads as under :–
Samvardhana Motherson Finance Limited
