+Ita 77/2022H.t. Media Limited v. +Ita 95/2022H.t. Media Limited

$~19 & 20 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 77/2022H.T. MEDIA LIMITED..... AppellantThrough:Mr.V.P. Gupta with Mr.AnunavKumar, Advocates. versus +ITA 95/2022H.T. MEDIA LIMITED..... AppellantThrough:Mr.V.P. Gupta with Mr.AnunavKumar, Advocates.versus PRINCIPAL COMMISSIONER OF INCOME TAX-4, DELHI ..... RespondentThrough:Mr.Ajit Sharma, Sr. StandingCounsel with Mr.A. Renganath,Advocate. Reserved on :27[th]October, 2022Date of Decision:23[rd]November, 2022 % CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J: ITA 77/2022 & ITA 95/2022 1.The present appeals have been filed under Section 260A of theIncome Tax Act, 1961, (‘Act’). 1.1The Assessee has impugned order dated 22[nd]February, 2021,passed in ITA No. 4583/Del/2017 for the Assessment Year (‘AY’)2012-13 in ITA No. 77/2022. 1.2The Assessee has impugned order dated 26[th]August, 2021,passed in ITA No.1876/Del/2018 for the AY 2013-14 in ITA No.95/2022. AY 2012-13 2.The facts giving rise to the present appeal are that the Appellant,Assessee, had filed its return of income (‘ROI’) for the relevantassessment year, declaring an income of Rs. 198,88,65,682/-. TheAssessee earned dividend income of Rs. 5,80,00,000/- in the said year,which was claimed as exempt income under Section 10(34) of the Act.The Assessee had suo moto disallowed a sum of Rs.1,00,000/- asexpenditure towards administrative expenses under Section 14A of theAct, in respect of the said tax-free income. The Assessing Officer(‘AO’) was not satisfied with the working of the disallowance made bythe Assessee and he, therefore, determined a sum of Rs. 1,44,85,000/-as the disallowance towards administrative expenses under Rule8D(2)(iii) of the Income Tax Rules, 1962 (‘IT Rules’). 2.1.The Commissioner of Income Tax (Appeals) [‘CIT(A)’] relyingupon the judgment of this Court in ACB India Ltd. vs. ACIT, (2015) ITA 77/2022 & ITA 95/2022 374 ITR 108 (Del), restricted the disallowance by ascertaining theamount of total investment and limiting it to the investment from whichthe tax-exempt dividend was earned. The CIT(A), however, excludedthe investment held by the Assessee in its subsidiary company eventhough it had yielded dividend. The CIT(A), therefore, restricted thedisallowance under Rule 8D(2)(iii) to Rs. 26.70 Lakhs. 2.2.The Income Tax Appellate Tribunal (‘Tribunal’) relied upon thejudgment of this Court in Assessee’s own case for the AY 2010-11 touphold the aforesaid disallowance under Rule 8D(2)(iii). However, theTribunal modified the order of the CIT(A) to the extent it disallowedthe value of Assessee’s strategic investment in its subsidiaries for thepurpose of computation of disallowance and added the same. TheTribunal held that the said investment held by the Assessee in thesubsidiary company has to be considered for the purpose ofdisallowance, following the judgment of the Supreme Court in MaxoppInvestment Ltd. vs. CIT, (2018) 402 ITR 640 (SC). The Tribunalconcluded that the disallowance under this Rule works out at Rs.55,12,500/-. The working of the said disallowance has been set out asunder: - AY 2013-14 3.In this AY, the Tribunal upheld the disallowance made by the AOunder Section 14A read with Rule 8D(2)(iii), as upheld by the CIT(A).However, for the purpose of calculation of the said disallowance theTribunal relied upon the order passed by its coordinate bench inAssessee’s own case for AY 2012-13 and has directed the AO to re-compute the disallowance under Rule 8D(2)(iii) by including theinvestment made by the Assessee in the subsidiary company. AY 2013-14 3.In this AY, the Tribunal upheld the disallowance made by the AOunder Section 14A read with Rule 8D(2)(iii), as upheld by the CIT(A).However, for the purpose of calculation of the said disallowance theTribunal relied upon the order passed by its coordinate bench inAssessee’s own case for AY 2012-13 and has directed the AO to re-compute the disallowance under Rule 8D(2)(iii) by including theinvestment made by the Assessee in the subsidiary company. 3.1.In this assessment year, the Assessee had earned dividend incomeof Rs. 7.04 Crores and had suo moto disallowed Rs.9,75,000/- underSection 14A of the Act, towards expenses pertaining to tax free income.The AO being unsatisfied with the suo moto disallowance by theAssessee towards administrative expenses, determined a sum of Rs.11,550,027/- as the disallowance towards administrative expensesunder Rule 8D(2)(iii) of the IT Rules. 3.2.The CIT(A), qua the disallowance on administrative expensesrelied upon the decision of its Predecessor Bench for AY 2012-13 tohold that the disallowance on average investment on which dividendincome has actually been received by the Assessee company excludingthe investment in subsidiary company works out at Rs. 23.46 Lacs being0.5% of average investment of Rs. 46.92 crores. 3.3.The Tribunal had dismissed the objection of the Assessee that nosatisfaction has been recorded by the AO, by observing that the AO has recorded the facts qua investment made by the Assessee in theshares/mutual funds and has also considered the working of the suomoto disallowance by the Assessee, however, the basis on which theAssessee arrived at the said figure of Rs. 9,75,000/- was not explained.The Tribunal further modified the order of the CIT(A) to the extent itexcluded the value of Assessee’s strategic investment in its subsidiaryfor the purpose of computation of disallowance and added the same.The Tribunal held that the said investment held by the Assessee in thesubsidiary company has to be considered for the purpose ofdisallowance following the judgment of the Supreme Court in MaxoppInvestment Ltd. (supra) and directed the AO to re-compute thedisallowance by including the investment made in the subsidiarycompany. Arguments of the Assessee 4.The arguments raised by the learned counsel for the Assessee arecommon for both the appeal(s) as the issues raised in the presentappeal(s) are same. 4.1.The learned counsel for the Assessee states that the Tribunalerred in holding that the AO has duly recorded its proper satisfaction interms of Section 14A(2) of the Act, without considering thesubmissions of the Assessee and the judgment of this Court inAssessee’s own case for AY 2008-09 being H.T. Media Ltd. vs.Principal Commissioner of Income Tax, (2017) 399 ITR 576. Hestates that the facts and circumstances in AY 2008-09 were similar andthis Court had in those proceedings held that the AO had not recorded proper satisfaction and therefore, the disallowance made by the AO wasdeleted. He states that the Tribunal erred in upholding the disallowancewithout appreciating that the AO has not recorded his satisfaction andtherefore, the disallowance of Rs. 1,00,000/- in its ROI should havebeen accepted. He states that the Tribunal failed to consider theexplanation submitted by the Assessee in its letter dated 10[th]December,2014, along with the basis for determining the disallowance of Rs.1,00,000/- under Section 14A of the Act, on account of expensesincurred in relation to the exempt income in AY 2012-13. He states thatthe Tribunal failed to appreciate that the disallowance of administrativeexpenses on the basis of salary cost of the Assessee’s financedepartment was calculated in the ratio of exempt income to grossreceipt, which was justified and reasonable and that the saidcomputation had been upheld by this Court in AY 2008-09. He statesthat the calculation of the disallowance for the AY 2012-13 was set outin the letter dated 10[th]December, 2014, and in letter dated 04[th]January,2016, for AY 2013-14. 4.2.The learned counsel for the Assessee states that there is nodispute about the quantification of the disallowance and the challengein the present appeal is that AO has not recorded any satisfaction whiledetermining the disallowance as per Section 14A of the Act, read withRule 8D if the IT Rules. Arguments of the Revenue 5.Mr. Ajit Sharma, learned senior standing counsel for the Revenue ITA 77/2022 & ITA 95/2022 appears on advance notice. He states that the Tribunal and the CIT(A)have returned concurrent findings in both the appeal(s) upholding thesatisfaction recorded by the AO for disallowance of the expenses underSection 14A of the Act. He states that the Tribunal has relied upon thejudgment of this Court in Assessee’s own case for AY 2010-11 whiledetermining the value of investment to be considered for disallowanceunder Rule 8D. He states that in AY 2010-11 and 2011-12 disallowanceunder Section 14A of the Act, read with Rule 8D has been upheld. 6.In rejoinder, learned counsel for the Assessee states that for AYs2010-11 and 2011-12, the issue of recording of proper satisfactionunder Section 14A of the Act was remanded by the ITAT to the AO. Hetherefore states that it is incorrect for Revenue to contend that thedisallowance for AYs 2010-11 and 2011-12 has been made as per Rule8D of the IT Rules. Analysis by this Court 7.We have heard the learned counsel for the parties. Thesubmission of learned counsel for the Assessee that the method adoptedby the Assessee for calculating the disallowance had been upheld in AY2008-09 and therefore the same should be accepted in the AY(s) 2012-13 and 2013-14, which are subject matter of the present appeal(s), onthe principle of consistency, is incorrect and contrary to the record. Thesubmission of the learned counsel for the Assessee that the issue ofsatisfaction for AYs 2010-11 and 2011-12 was remanded by ITAT toAO is also not borne out from the record. ITA 77/2022 & ITA 95/2022 7.1.On a perusal of the Tribunal’s order, it is borne out that in theintervening assessment years i.e., AYs 2010-11 and 2011-12, the AOhad similarly calculated the disallowance under Rule 8D(2)(iii), onaccount of administrative expenses incurred on earning of exemptincome and the same was upheld by the Tribunal in its order dated 05[th]September, 2018. The method adopted by the Assessee for making suomoto disallowance was not accepted by the AO in the said assessmentyears and the AO proceeded to invoke Rule 8D(2)(iii) for determiningthe administrative expenses for disallowance. 7.2.For AYs 2010-11 and 2011-12, the ITAT in its order dated 05[th]September, 2018 upheld the satisfaction recorded by the AO withrespect to the invocation of Section 14A of the Act read with Rule8D(2)(iii). However, the ITAT observed that while computing thedisallowance, the AO had not taken into consideration the amount ofRs.5,45,000/- disallowed by the Assessee. This finding of ITAT isborne-out from the assessment order of AY 2010-11, where the AOwhile calculating the expenditure under Rule 8D(2)(iii) of the Act, didnot take into account, the disallowance of Rs.5,45,000/-. In other words,the amount of Rs. 5,45,000 was not accounted for by the AO and to thatextent the demand was excessive. The ITAT remanded the said issueback to the AO with the mandate for determining the average value ofinvestment to which Rule 8D(2) has to be applied and thereafter tocalculate the expenditure incurred by the Assessee on non-exemptinvestments including interest portion. The terms of the remand ofITAT is premised on the acceptance of valid invocation of Rule 8D(2). ITA 77/2022 & ITA 95/2022 There was, thus, no surviving issue with respect to validity of thesatisfaction recorded by AO under Section 14A of the Act beforemaking disallowance. ITA 77/2022 & ITA 95/2022 There was, thus, no surviving issue with respect to validity of thesatisfaction recorded by AO under Section 14A of the Act beforemaking disallowance. 7.3.This becomes further evident from the order dated 29[th]March,2019 passed by this Court while disposing of the appeal filed byRevenue against the ITAT’s order dated 5[th]September, 2018 for AY2010-11 in ITA No. 281/2019 wherein, this Court recorded the scopeof remand by the ITAT as follows: “Issue notice to the respondent. Mr. V.P. Gupta, Advocate accepts notice on behalf of therespondent. With the consent of learned counsel, this appealis heard. The question urged by the Revenue in its appeal is withrespect to the correctness of the remand made by the ITAT inits impugned order; the remand was on two aspects i.e. thecalculation of average investments (confined to the incomegenerating part thereof) and the exclusion of tax exemptincome derived from strategic investments. The observation of the ITAT on the latter aspect, i.e.exclusion of tax exempt income derived from a strategicinvestments, is not a correct view in the light of the decisionof the Supreme Court in Maxopp Investment Ltd. Vs.CommissionerofIncomeTax,(2018) 402ITR 640.Accordingly, the observations of the ITAT on this aspect areset aside. However, its observations with respect to thecalculation of disallowance under Section 14A beingconfined to investments that derived tax exempt income arevalid in the light of the Division Bench ruling in ACB IndiaLtd. v. ACIT, (2015) 374 ITR 108 (Del). In view of the above clarification, the ITAT’s order, to theextent that it makes observations with respect to exclusion of ITA 77/2022 & ITA 95/2022 income derived from strategic investments, is hereby setaside. This appeal is partly allowed.” (Emphasis supplied) 7.4.This Court in fact modified the order of remand and issuedfurther directions to the AO for arriving at the value of averageinvestment for applying the method under Rule 8D(2)(iii). The order ofthis Court proceeded on the premises that Section 14A of the Act, hasbeen invoked after recording of proper satisfaction. 7.5.The contention sought to be raised by learned counsel forAssessee that the issue of satisfaction under Section 14A of the Act, wasalso remanded to the AO for AY 2010-11 is not borne out from theorders of the ITAT or this Court. The order dated 29[th]March, 2019, ofthis Court was passed in the presence of learned counsel for theAssessee, however, the Assessee had not raised any contention beforethis Court that the issue of proper satisfaction before invoking Section14A is also an issue to be decided by the AO on remand. 7.6.With respect to AY 2011-12 as well, the ITAT upheld theinvocation of Section 14A read with Rule 8D and remanded the matterto the AO for the purpose of calculating the value of average investmentand the expenditure incurred by the Assessee on non-exemptinvestments. 7.7.The Assessee has admittedly not challenged the order dated 5[th]September 2018 of ITAT for AYs 2010-11 and 2011-12 as well as order of this Court for AY 2010-11. The order passed by the ITAT for theyear AY 2010-11 has merged with the order dated 29[th]March, 2019,passed by this Court, which sets out the scope of the remand, which islimited to determining the average value of investment. 7.8.Therefore, in light of the aforesaid decision of predecessor bench,it can be seen that in the intervening AY(s) 2010-11 & 2011-12, themethod of disallowance adopted by Assessee was rejected by the AOand the said rejection was confirmed by the ITAT. The said order ofITAT has not been challenged by Assessee and has attained finality.Thus, the submission of the Assessee on the basis of principle ofconsistency does not hold ground. Disallowance under section 14A of this Court for AY 2010-11. The order passed by the ITAT for theyear AY 2010-11 has merged with the order dated 29[th]March, 2019,passed by this Court, which sets out the scope of the remand, which islimited to determining the average value of investment. 7.8.Therefore, in light of the aforesaid decision of predecessor bench,it can be seen that in the intervening AY(s) 2010-11 & 2011-12, themethod of disallowance adopted by Assessee was rejected by the AOand the said rejection was confirmed by the ITAT. The said order ofITAT has not been challenged by Assessee and has attained finality.Thus, the submission of the Assessee on the basis of principle ofconsistency does not hold ground. Disallowance under section 14A 8.We are also not persuaded by the contention of the Assessee thatthe AO has failed to record proper satisfaction before rejecting theexplanation offered for the disallowance made by the Assessee itselfand proceeding to make the disallowance under Section 14A of the Actread with Rule 8D(2)(iii). 8.1.The AO at paragraph 3.1 of his assessment order dated 19[th]January, 2015, for AY 2012-13, after examining the accounts, calledupon the Assessee to explain the basis of the estimation of expenses ofRs. 1,00,000/- disallowed by the Assessee for the tax-free income of Rs.85.04 Crores earned in the AY 2012-13. The AO put the Assessee tonotice of his intention to calculate the disallowance as per Rule8D(2)(iii). Paragraph 3.1 of the said assessment order reads as under: - “3.1 A perusal of profit & loss account and balance sheetreveals that assessee company has made investment in quotedshares at Rs. 9,29,28,10,000/- as on 31[st]March, 2012 out ofwhich investment of Rs. 2,99,11,00,000/-has been made inequity shares for the purpose of earning dividend income andlong term capital gains which are exempt and not chargeableto tax under the Income Tax Act whereas the total turnoverof the assessee company is Rs. 12,14,21,56,000/-. Theassessee company has earned dividend income at Rs.5,80,00,000/-duringtheyearunderreference.Onexamination of computation of income it is noted that theassessee has disallowed Rs. 1,00,000/- u/s 14A beingexpenses pertaining to the tax free income. During theassessment proceedings, the assessee company was asked toexplain the basis of estimation of expenses at Rs. 1,00,000/-pertaining to tax free income and as to why suchdisallowance may not be computed as per Rule 8D of I.T.Rules, 1962. In response, vide reply dated 10.12.2014, theassessee has submitted that no direct expense was incurredfor earning of this dividend income however the disallowance”-of Rs. 1,00,000/ computed on estimation basis. [Emphasis supplied] 8.2.The Assessee filed its reply dated 10[th]December, 2014, to thesaid notice and stated that there was negligible cost incurred by theAssessee company on account of administrative expenses. TheAssessee, however, stated that the company had offered a sum of Rs.1,00,000/- by allocating the proportionate salary cost of corporatefinance department executives in the ratio of exempt income to grossturnover ratio. In support of the said contention the Assessee alsoannexed to its letter, a computation explaining the method of costallocation. The AO at paragraph 3.2 after duly considering the financialstatements of the Assessee and the said reply filed by the Assessee, ITA 77/2022 & ITA 95/2022 recorded his unsatisfaction with respect to the computation furnishedby the Assessee in the following terms:- “3.2 The submissions advanced by the assessee companyhave duly been considered. The working of disallowance ofthe assessee u/s 14A read with Rule 8D of the I.T. Rules hasbeen gone through and considered. On what basis theassessee has arrived at the figure of Rs. 1,00,000/- is notclear. Similarly, the assessee’s claim that it has not incurredany other expenses in respect of management of investmentaffairs is also not acceptable. Thus, I am not satisfied withthe working of disallowance u/s 14A by the assessee, henceactual disallowance as per Rule 8D is required.” ITA 77/2022 & ITA 95/2022 recorded his unsatisfaction with respect to the computation furnishedby the Assessee in the following terms:- “3.2 The submissions advanced by the assessee companyhave duly been considered. The working of disallowance ofthe assessee u/s 14A read with Rule 8D of the I.T. Rules hasbeen gone through and considered. On what basis theassessee has arrived at the figure of Rs. 1,00,000/- is notclear. Similarly, the assessee’s claim that it has not incurredany other expenses in respect of management of investmentaffairs is also not acceptable. Thus, I am not satisfied withthe working of disallowance u/s 14A by the assessee, henceactual disallowance as per Rule 8D is required.” [Emphasis supplied] 8.3.On a perusal of paragraph 3.1 and 3.2 of the assessment order(s)for the concerned assessment years qua the issue of recording ofsatisfaction by the AO, it can be seen that the AO in first place examinedthe Assessee’s accounts and was not satisfied with the disallowanceoffered by the Assessee and had, therefore, called upon the Assessee tooffer its explanation with respect to the break up the disallowance. 8.4.The AO thereafter examined the accounts of the Assessee and theexplanation submitted by him vide its letter dated 10[th]December, 2014,qua the Assessee’s disallowance of administrative expense. The AOobserved that the submissions made by the Assessee is unsatisfactoryand held that the working of the disallowance is without any ‘basis’ andconsequently, proceeded to invoke Rule 8D(2)(iii). 8.5.In the appeal filed by the Assessee, the said finding of the AOwas upheld by CIT(A). The CIT(A) as well, after considering the submissions of the Assessee in its letter dated 10[th]December, 2014, heldthat the amount offered by the Assessee as a disallowance towardsadministrative expenses was on a ‘guess estimate’ basis rather than itbeing actually borne out from the records of the Assessee. Accordingly,the CIT(A) concurred with the disallowance made by the AO underRule 8D(2)(iii) of the IT Rules, after rejecting the explanation submittedby the Assessee for offering the sum of Rs. 1,00,000/-. 8.6.In the appeal filed by the Assessee, the Tribunal as well upheldthe finding of the AO recording his unsatisfaction with respect to thedisallowance offered by the Assessee. Further, the Tribunal in its impugned order dated 26[th]August,2021, for AY 2013-14 has returned a finding of fact that in the yearunder consideration there was churning and change in the investmentportfolio of the Assessee, as the Assessee had sold some of itsinvestments and made new investments. The Tribunal held that thedecisions pertaining to selection of new investments and appropriatetime for sale of existing investments would necessarily requireapplication of mind and time by the management of the Assessee. TheTribunal, therefore, concluded that the claim that no expenditure hadbeen incurred by the Assessee in the relevant assessment year wasunacceptable. 8.7.The Tribunal in its impugned order dated 26[th]August, 2021, hasalso held that the Assessee’s estimate of disallowance is contrary to itsclaim of no expenditure and it accordingly rejected the submissions of the Assessee and upheld the application of Rule 8D(2)(iii) by the AOand CIT(A). 8.8.The AO and the appellate authorities have, thus, concurrentlyfound that the disallowance of expense relating to exempt incomeoffered by the Assessee was not borne out from the records and no‘basis’ has been provided for arriving at the amount of disallowance andtherefore, rejected the said disallowance estimated by the Assessee. TheAO and the appellate authorities rejected the contention of the Assesseethat it has incurred negligible expenses for earning the exempt income. 8.7.The Tribunal in its impugned order dated 26[th]August, 2021, hasalso held that the Assessee’s estimate of disallowance is contrary to itsclaim of no expenditure and it accordingly rejected the submissions of the Assessee and upheld the application of Rule 8D(2)(iii) by the AOand CIT(A). 8.8.The AO and the appellate authorities have, thus, concurrentlyfound that the disallowance of expense relating to exempt incomeoffered by the Assessee was not borne out from the records and no‘basis’ has been provided for arriving at the amount of disallowance andtherefore, rejected the said disallowance estimated by the Assessee. TheAO and the appellate authorities rejected the contention of the Assesseethat it has incurred negligible expenses for earning the exempt income. 8.9.We have also perused the letter(s) dated 10[th]December, 2014,and 04[th]January, 2016, filed by the Assessee as justification in supportof the disallowance offered by it. The contents of the Assessee's lettersare identical wherein it has been stated that the Assessee has incurrednegligible cost on account of administrative expenses. The relevantportion of the letter dated 10[th]December, 2014, reads as under:- “As regards the disallowance on account of administrativeexpense, it is submitted that the activities relating toinvestmentisattendedbytheexecutivesoffinancedepartment who are primarily employed for the businessactivities of the company. During the subject year, thecompany has received dividend income from one investment.Hence, there was only one entry passed in books foraccounting such dividend Income. Also, such dividendincome was directly credited into the account of company byway of ECS credit. In view of direct credit of dividend incomeinto bank and requisite accounting for the same, there couldbe negligible cost incurred by the company on account ofadministrative activities. The expenditure incurred by thecompany on recording these entries during the year would be Signature Not Verified negligible as compare to business operations of the company.The Company however has already offered Rs one lakhtowardsmeetingofadministrativeexpensesinitscomputation of taxable income which in view of the assesseecompany is sufficient and justified. The said amount has beendetermined by allocating the proportionate salary cost ofcorporate finance department executives in the ratio ofexempt income to gross turnover ratio. The said method ofallocation is given at Annexure 6 of this submission.” (Emphasis supplied) 8.10.The method of allocation adopted by the company forcalculating the disallowance filed in support of the said letter isreproduced hereunder:- H T Media Ltd FY 2011-12 Allocation of proportionate corporate finance cost towards exempt (Emphasis supplied) 8.11. A perusal of the contents of the letter and the table calculating the disallowance, substantiate the finding of the AO and CIT(A) that thedisallowance made by the Assessee is admittedly on an ad-hoc basis.The AO and CIT(A) rejected the method of apportionment offered bythe Assessee having not found the same to be reasonable or satisfactory;the CIT (A) held the same to be "guess estimate" and the said findinghas been upheld by the Tribunal. The Assessee in the letter has used theexpression ‘say Rs.’, which substantiates the findings of the appellateauthorities that it is a mere “guess estimate” of the Assessee. H T Media Ltd FY 2011-12 Allocation of proportionate corporate finance cost towards exempt (Emphasis supplied) 8.11. A perusal of the contents of the letter and the table calculating the disallowance, substantiate the finding of the AO and CIT(A) that thedisallowance made by the Assessee is admittedly on an ad-hoc basis.The AO and CIT(A) rejected the method of apportionment offered bythe Assessee having not found the same to be reasonable or satisfactory;the CIT (A) held the same to be "guess estimate" and the said findinghas been upheld by the Tribunal. The Assessee in the letter has used theexpression ‘say Rs.’, which substantiates the findings of the appellateauthorities that it is a mere “guess estimate” of the Assessee. 8.12. The Assessee in the facts of the present case has admittedly notfurnished particulars of the actual expenditure incurred by it for earningthe exempt income. It is the case of the Assessee that it had incurrednegligible expenses, which are indeterminate and it has therefore reliedupon its own self – devised method for estimating the said negligibleexpenditure. However, the AO recorded his dissatisfaction with thecomputation of disallowance after examining the accounts of theAssessee. Section 14A read with Rule 8D(2)(iii) prescribes the methodto be applied for determining the expenditure incurred for earningexempt income. The AO and the appellate authorities, in the facts ofthis case, cannot be faulted for applying the statutory method fordetermining the expenditure and rejecting the Assessee’s suo motodisallowance. 8.13.The dissatisfaction of the AO is expressly recorded in theassessment order. The said dissatisfaction has been upheld by theappellate authorities after perusing the records of the Assessee. We donot find any merit in the submission of the Appellant that the AO has ITA 77/2022 & ITA 95/2022 failed to record satisfaction. The Assessee has failed to point out anyerror in the findings of the appellate authorities except to state that thedisallowance offered by the Assessee should be accepted as it was donein AY 2008-09 and AY 2009-10 on the principle of consistency. In thisregard, we observe that this Court in its decision for AY 2008-09 whilesetting aside the deletion under Section 14A has not upheld the self -devised method adopted by Assessee for making the allowance butadjudicated on the failure of the AO to record his proper satisfactionbefore invoking Section 14A. We have already rejected the submission of application ofprinciple of consistency and further, held that the disallowance offeredby the Assessee in the assessment years under consideration being onan ad-hoc basis has been rightly rejected by the AO. We, therefore, donot find any reason to interfere with the said concurrent findings of theappellate authorities. 9.It is pertinent to note here that the Supreme Court in the case ofGodrej & Boyce Manufacturing Co. Ltd. v. Dy. CIT & Anr., [2017]394 ITR 449 (SC) at paragraph no. 37 has held as under:- “37. …Whether such determination is to be made onapplication of the formula prescribed under rule 8D or in thebest judgment of the Assessing Officer, what the lawpostulates is the requirement of a satisfaction in the AssessingOfficer that having regard to the accounts of the assessee, asplaced before him, it is not possible to generate the requisitesatisfaction with regard to the correctness of the claim of theassessee. It is only thereafter that the provisions of section14-A(2) and (3) read with rule 8-D of the Rules or a best Signature Not Verified judgment determination, as earlier prevailing, would becomeapplicable.” “37. …Whether such determination is to be made onapplication of the formula prescribed under rule 8D or in thebest judgment of the Assessing Officer, what the lawpostulates is the requirement of a satisfaction in the AssessingOfficer that having regard to the accounts of the assessee, asplaced before him, it is not possible to generate the requisitesatisfaction with regard to the correctness of the claim of theassessee. It is only thereafter that the provisions of section14-A(2) and (3) read with rule 8-D of the Rules or a best Signature Not Verified judgment determination, as earlier prevailing, would becomeapplicable.” 10.As noted above, in the present case as well, a perusal of the recordreveals that the AO has applied his mind to the controversy as he firstlyexamined accounts, secondly duly invited the reply of the Assessee toexplain the basis of the disallowance offered by the Assessee and thirdlyafter examining the explanation of the Assessee has recorded itsdissatisfaction after observing that the ‘basis’ adopted by the Assesseefor making such an estimate was unclear. The CIT(A) and ITAT, whichare the fact finding authorities upon examination of record, haveconcurred with the said finding of dissatisfaction of the AO. 11.We therefore in the facts of this case do not find that anysubstantial question of law arises for consideration in the presentappeals, accordingly the same are dismissed. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J NOVEMBER 23, 2022msh/aa ITA 77/2022 & ITA 95/2022