The Pr. Commissioner Of Income Tax - 4 v. H.t. Media Ltd

$~14 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 230/2019 THE PR. COMMISSIONER OF INCOME TAX - 4 ..... Appellant Through:Mr. Raghvendra Singh, Sr. StandingCounsel with Mr. Vipul Agrawal,Advocate. versus H.T. MEDIA LTD. Through:None. ..... Respondent CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAO R D E R%26.08.2019 1. This is an appeal filed by the Revenue against the order dated 5[th]September 2018, passed by the Income Tax Appellate Tribunal (ITAT)under the Income Tax Appeal No. 6394/DEL/2013 (A.Y. 2009-10). 2. At the outset, Mr. Raghvendra Singh, learned Senior Standing Counsel forthe Appellant very fairly states that the issues/questions framed in thepresent appeals are covered by the decision of this Court in H.T. Media Ltd.v. Principal Commissioner of Income Tax-IV (2017) 399 ITR 576 (Delhi).The questions of law framed in the said appeal were as follows: " While admitting ITA No. 548 of 2015 on 15th October 2015,the following question was framed for consideration: Whether the ITAT erred in remitting the matter concerning thedeletion of disallowance of interest under clause (ii) of Rule 8D (2) of the Income Tax Rules, 1962 to the Assessing Officerfor a fresh determination in light of the decision of this Court inCIT v. Taikisha Engineering India Ltd. (2015) 370 ITR 338(Del)?" While admitting ITA No. 549 of 2015 on 15th October 2015,the following question was framed for consideration: "Whether the Assessing Officer recorded a proper satisfactionin terms of Section 14A(2) and Rule 8 (D) of the Income TaxRules, 1962 and, in calculating the disallowance at 0.5% ofaverage value of investments as per clause (iii) of Rule 8 D (2)of the Income Tax Rules, 1962?" 3. The findings returned by this Court in the said decision read as follows: "37.Intheconsideredview ofthisCourt,theaboveobservations of the AO in the assessment order are of a broadgeneral nature not with particular reference to the facts of thecase on hand. 38. The Court is also unable to agree with Mr. Singh that onthis aspect there are concurrent findings of both the CIT (A) aswell as the ITAT. The CIT (A) disallowed the exempt expensesby merely repeating what the AO had stated about the cost thatis built into so called 'passive' investments and simply recordedthat the AO was bound to Rule 8D and, therefore, was justifiedin determining administrative costs at 0.5%. Here again, theCIT (A) failed to note that without the mandatory requirement,under Section 14A of the Act and Rule 8D of the Rules, ofsatisfaction being recorded being met, the question of applyingRule 8D (1) did not arise. 39. Turning now to the order of the ITAT, in para 33, itrecorded the submission of the AR that the AO did not record any satisfaction about the Assessee not properly offeringexpenditure incurred in relation to the exempt income at Rs. 3lakhs. The ITAT reproduced the contents of para 3.3.1 of theassessment order, which has been extracted by this Courthereinbefore, which contains general observations regardingearning of exempt income. This cannot be accepted as arecording by the AO of satisfaction regarding the claim of theAssessee after examining its accounts. Again, in para 34 of itsorder, the ITAT simply reproduced para 3.3.6 of the assessmentorder where, again, no reasons have been provided but only aconclusion has been reached that the AO was "satisfied that theAssessee had incurred expenses to manage its investmentswhich may yield exempt income, and Assessee grossly failed tocalculate such expenses in a reasonable manner to ascertain thetrue and correct picture of its income and expenses." 40. Consequently on the aspect of administrative expensesbeing disallowed, since there was a failure by the AO to complywith the mandatory requirement of Section 14 A (2) of the Actread with Rule 8D (1) (a) of the Rules and record hissatisfaction as required thereunder, the question of applyingRule 8D (2) (iii) of the Rules did not arise. The question framedin ITA 549 of 2015 is answered accordingly." 40. Consequently on the aspect of administrative expensesbeing disallowed, since there was a failure by the AO to complywith the mandatory requirement of Section 14 A (2) of the Actread with Rule 8D (1) (a) of the Rules and record hissatisfaction as required thereunder, the question of applyingRule 8D (2) (iii) of the Rules did not arise. The question framedin ITA 549 of 2015 is answered accordingly." 4. In view of the submission made by learned Counsel for the Appellant, theappeal is accordingly dismissed. VIPIN SANGHI, J AUGUST 26, 2019ss SANJEEV NARULA, J