J. B. Advani & Co. Pvt. Ltd.… v. Commissioner Of Income Tax,Mumbai City-Ii

bsb IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1182 OF 2013 J. B. Advani & Co. Pvt. Ltd.… Appellant v/s Commissioner of Income Tax,Mumbai City-II. … Respondent Ms.Arti Sathe a/with Mr.Kalpesh Turalkar for the appellant.Mr.A.R. Malhotra for the respondent. CORAM: S.C. DHARMADHIKARI & G.S. KULKARNI, JJ. DATED : 6TH MARCH, 2014 P. C. : 1Heard learned counsel for both parties. 2This appeal is preferred by the assessee. It is a private limited company inter-alia engaged in the business of manufacturing of welding transformer/rectifier. It filed the return of income under the Income Tax Act, 1961 (in short, the Act) on 30[th] September, 2008 for the assessment year 2008-2009 declaring an income of Rs.2,49,26,189/-. 3At the time of the assessment, various queries were raised. On perusal of the balance sheet, it was noticed that the appellant had an investment of Rs.16,73,84,000/-. The stand was that the appellant had earned exempted income on this investment and, therefore, the Assessing Officer invoked Section 14A read with Rule 8D of the Income Tax Rules, 1962. The appellant was asked to explain as to why the expenses related to exempt income should not be disallowed in terms of these provisions. 4A letter was addressed on 19[th] November, 2010 in which a list of the companies from whom the appellant received dividend was given. These companies were the group companies. The dividend amount was mentioned and it was submitted that, in the previous year preceding the present assessment year, there were no borrowings made by the appellant. It was further submitted that all these were old investments. Reliance was placed on the appellant's own case for earlier assessment year. It was earlier held by the Income Tax Appellate Tribunal that no expenditure was incurred on earning of the dividend income which was earned on account of very old expenses. Thus, no expenses were incurred and, therefore, Rule 8D could not be invoked. 5These contentions have been rejected by the Assessing Officer and he invoked Rule 8D and made a disallowance of Rs.7,83,907/-. The Assessing Officer thus calculated the tax to the tune of Rs.30,14,290/-. The matter was carried in appeal to the Commissioner of Income Tax (Appeals), who dismissed the appeal on 7[th] June, 2011. That order of the Commissioner of Income Tax (Appeals) has been affirmed by the Income Tax Appellate Tribunal. 6Ms.Sathe appearing on behalf of the appellant submitted that the appeal raises substantial questions of law which have been formulated by the appellant. The Tribunal was not justified in holding that the provisions of Section 14A read with Rule 8D are applicable when none of the authorities had given any specific finding that for earning the exempt income any expenditure was actually incurred by the appellant. She submitted that such finding was pre-requisite for invoking Rule 8D or else it cannot be revoked. In none of the orders there is such a finding. She placed reliance upon the judgment of the Division Bench of this Court in the case of Godrej & Boyce Manufacturing Co. P. Ltd. v/s Deputy Commissioner of Income Tax and anr., reported in (2010) 328 ITR 81 (Bom.). 6Ms.Sathe appearing on behalf of the appellant submitted that the appeal raises substantial questions of law which have been formulated by the appellant. The Tribunal was not justified in holding that the provisions of Section 14A read with Rule 8D are applicable when none of the authorities had given any specific finding that for earning the exempt income any expenditure was actually incurred by the appellant. She submitted that such finding was pre-requisite for invoking Rule 8D or else it cannot be revoked. In none of the orders there is such a finding. She placed reliance upon the judgment of the Division Bench of this Court in the case of Godrej & Boyce Manufacturing Co. P. Ltd. v/s Deputy Commissioner of Income Tax and anr., reported in (2010) 328 ITR 81 (Bom.). 7We have perused the concurrent orders with the assistance of the learned counsel for both parties. We have also perused the contents of the letter dated 19[th] November, 2010. The Assessing Officer has referred to the balance sheet. The assessee has earned an exempt income. Therefore, an explanation was sought as to why the expenses related to this income should not be disallowed. The reply of the assessee was that no expenditure has been incurred vis-a-vis the exempt income. The finding of the Assessing Officer is that this contention is not acceptable in view of insertion of Rule 8D of the Income Tax Rules. What has been urged is that, there is no finding recorded and which is the pre-requisite for the purpose of invoking Rule 8D. We find that, in that regard specific stand taken in the letter dated 19[th] Novemebr, 2010 has been considered. The Commissioner of Income Tax (Appeals) has also in paragraph 5 of his order held that the disallowance has been worked out because the Rule applies and only those investments should be taken into consideration from which maximum income is earned. Once the appellant assessee before us has not segregated such investments before the Assessing Officer or before the Commissioner, that the addition made was upheld. In these circumstances, rightly holding and reiterating this factual conclusion, the Tribunal did not commit any error. We are of the opinion that the judgment in the case of Godren & Boyce Mfg. Co. Ltd. (supra) deals with the issue of constitutional validity of the provision in question, namely, Section 14A and Rule 8D of the Rules. In that context, dealing with the challenge, the Division Bench made the observations relied upon. The application of the provisions, therefore, depends upon the facts and circumstances in each case. In the present case, we find that the Rule has been invoked based on the assessee's own stand which has been recorded. It is not as if without the pre-requisites being satisfied that the Assessing Officer, the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal, have applied the Rule in question. 8In these circumstances, re-appreciation of the finding of fact is not permissible in our limited jurisdiction. The appeal does not give rise to any substantial question of law and, therefore, it is dismissed. (G.S. KULKARNI, J.) (S.C.DHARMADHIKARI, J.)