Itl/18/2013 Of The Asstt. Commissioner Of Income Tax v. M/S Jamnalal Sons Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYNAGPUR BENCH, NAGPUR. INCOME TAX APPEAL No. 19 OF 2013 The Asstt. Commissioner of Income Tax, Wardha Circle, Wardha. -Vrs.- M/s Jamnalal Sons Pvt. Ltd., Wardha. AND INCOME TAX APPEAL No. 18 OF 2013 The Asstt. Commissioner of Income Tax, Wardha Circle, Wardha. -Vrs.- M/s Jamnalal Sons Pvt. Ltd., Wardha. _______________________________________________________________________ Office Notes, Office Memoramda of Coram,appearances, Court's orders of directionsand Registrar's Orders. Court's or Judge's orders. Mr. S.N. Bhattad, counsel for appellant. Mr. Thakar, counsel for respondent. CORAM : B.P. DHARMADHIKARI ANDP.N. DESHMUKH, JJ. DATED :1 st OCTOBER, 2015 The income tax department has questioned use ofRule 8D added to Income Tax Rules 1962 for Assessment Year2008-09. The assessment years in dispute in these appeals are2004-05 and 2005-06 respectively. Assessing Officer records afinding of fact which shows that borrowed amount has beenused and invested by Assesee for his business and accordinglyinterest paid on such borrowed amount has been disallowedunder section 14A of Income Tax Act. We are not giving theexact figures here but then assessee filed separate appealsbefore CIT(A) challenging this finding of fact. Submission ofassessee before CIT was that he invested his own fund andtherefore the exempt income was not earned with assistance of said borrowed fund. In alternate, attention was also invited toRule 8D. 2.The CIT(A) has looked into only alternatesubmission and applying provisions of Rule 8D, calculated thedisallowance in terms of formula prescribed thereunder. 3.This was questioned by appellant only before ITAT.ITAT in the impugned order found that as per judgment ofparent High Court ( this High Court) the provisions of Rule 8Dare prospective and therefore could not have been applied tothe assessment years in question. It, therefore, allowed theappeals partly. 4.The department in these two appeals contends thateven if Rule 8D, is held to be not applicable, the application ofSection 14A of Income Tax Act needed appreciation and TIATought to have therefore remanded matter back to CIT(A). 5.Advocate Thakar does not dispute this proposition.According to him, CIT(A) erred in deciding two appeals ofassessee only by looking into alternate submission. Mainsubmission that Section 14A itself had no application has beenlost sight of. He attempts to demonstrate to this court that infact assessee had invested its own fund and no part ofborrowed amount was used to earn the exempt income. Perusal of record shows that CIT(A) has not lookedinto the main ground raised by assessee in his appeals. CIT(A)ought to have first considered whether finding of fact recordedby Assessing Officer about the utilization of borrowed amountin part by assessee was correct or not. That exercise has notbeen undertaken. ITAT also has overlooked this aspect. In this situation, with the consent of parties, weplace the matter back before CIT(A) and only for said purposethe impugned order of ITAT dated 16.10.2012 is quashed andset aside. CIT(A) shall hear the parties on correctness orotherwise of the finding recorded by Assessment Officer onutilization of part of borrowed amount by assessee and thenfind out relevance of Section 14A of Income Tax Act. We direct the parties to appear before the saidauthority on 18.11.2015 and to abide by further instructions inthe matter. Needless to clarify that controversy in relation toapplication of Rule 8D as amended lateron is not open fordebate before CIT(A) and it stands concluded by order of TIAT. JUDGE JUDGE