IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `E' : NEW DELHI)
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
and
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA No.424/Del./2013
(ASSESSMENT YEAR : 2009-10)
ACIT, Circle II, vs. M/s. N.H.P.C. Limited,
Faridabad. NHPC Complex,
Sector 33,
Faridabad.
(PAN : AAACN0149C)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : S/Shri Ved Jain, Ashish Goel and
Pranjal Shrivastava, Advocates
REVENUE BY : None
Date of Hearing : 23.07.2015
Date of Pronouncement : 26.08.2015
ORDER
PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal, at the instance of the revenue, is directed against the
order of the Commissioner of Income-tax (Appeals), Faridabad dated
29.10.2012 for the assessment year 2009-10.
2. The brief facts of the case are that the assessee company is a Public
Sector Undertaking and has been engaged in the business of construction
of Hydro Power Projects, Generation and Distribution of Electricity and
Consultancy Services. The return of income declaring NIL income after
2 ITA No.424/Del./2013
claiming deduction to the extent of Rs.3,63,99,65,437/- u/s 80IA of the
Income-tax Act, 1961 (hereinafter `the Act') was E-filed by the assessee
on 26.09.2009. The book profit under the provisions of section 115JB of
the Act was, however, declared at Rs.1141,51,66,920/-. Thereafter, the
assessee filed a revised return on 30.03.2010 revising book profit at
Rs.1115,30,68,920/- u/s 115JB of the Act. The case was selected for
scrutiny through CASS and a notice u/s 143(2) of the Act was issued on
19.08.2010. In the assessment order, the AO has made several additions
and disallowances while computing the income under the normal,
provisions as well as under section 115JB of the, Act, which have been
challenged by the assessee before the first appellate authority. The ld. CIT
(A) allowed the appeal of the assessee.
3. Aggrieved, the revenue is in appeal before us.
4. The revenue has taken the following grounds of appeal :-
"(A) The order of the Ld. CIT (A) is not acceptable as the assessee has
failed to establish these provisions to be of ascertained in nature in spite of
ample opportunities provided by the A.O. Reliance has been placed by the
A.O. on the judgment of Hon'ble supreme Court in the case of Shree
Sajjan Mills in which it has been mentioned that nature of provisions for
gratuity is a contingent liability because the payment of gratuity is made in
consideration of the entire length of service & it's ascertainment depends
upon several factors & until unless the employee is retired or his services
are terminated, the right to receive gratuity remains as his contingent right.
(B) On the facts & the circumstances of the case, the Ld. C1T(A) has
erred in deleting the above addition of Rs.1,80,79,857/- made by the A.O.
as the same is not allowable on unclassified land or lease hold land as per
companies act & also the department has already filed 2nd appeal before
the Hon'ble ITAT on the same issue in earlier year.
3 ITA No.424/Del./2013
(C) The order of the Ld CIT(A) has not been found acceptable as A.O.
has rightly applied Rule 8D which came into effect w.e.f. 01.04.2008.
Further, on one hand the assessee has made huge investments for earning
tax free dividends & on other hand huge interest has been paid on loans.
Hence the assessee has claimed expenditure on income not offered for
taxation.
(D) That the appellant craves for the permission to add, delete or
amend the grounds of appeal before or at the time of hearing of appeal."
5. Apropos Ground 1 is in respect of claim of provision for gratuity
and other benefits which are not allowable, since they are contingent in
nature while computing book profit u/s 115JB of the Act. The AO in this
regard noted that the assessee while computing book profits did not
consider the following provisions earmarked for addition while computing
book profit u/s 115JB of the Act:-
Sr. No. Description Amount
1 Provision for Gratuity 47,66,82,534/-
2 Provision for Leave Encasement 20,61,51,780/-
3 Provision for EPF Matching 6,33,04,525/-
Contribution on Leave Encashment
4 Provision for Retired Employee Health 7,13,52,087/-
Scheme
5 Provision for Leave Travel Concession 62,73,072/-
6 Provision for baggage allowance on 19,46,240/-
superannuation
Total 82,57,10,238/-
The AO asked the assessee to show cause in this regard and the assessee
vide letter dated 17.08.2011 submitted its explanation. After going
through the submission of the assessee, the AO observed that the
concerned provisions are not an ascertained provisions i.e. a contingent
4 ITA No.424/Del./2013
liability and accordingly Rs.82,57,10,238/- was added to the book profit as
per the provisions of section 115JB of the Act.
6. The ld. CIT (A), after going through the order of the AO and
submissions of the assessee, held as under :-
"6. I have considered the submissions of learned Counsel for the
appellant and gone through the documents filed on record as well as
the judicial rulings relied upon by the learned counsel and the AO.
The grounds No.1 & 7 of appeal are general in nature and covered
by the main grounds of appeal. In ground No. 2 of appeal, the
appellant has challenged the addition of Rs.82,57,10,238/- made on
account of the Provision for gratuity, leave encashment, post
retirement medical benefit, LTC, Baggage allowance and Matching
Contribution on Leave Encashment etc., for the purpose of
computing tax liability u/s 115JB of the Act. As discussed in para 3
of the assessment order, the AO has added the above provisions for
the purpose of computing book profit u/s 115JB following the
decision of Hon'ble Supreme Court in the case of Shree Sajjan Mills
vs. CIT (156 ITR 585) after holding the said provisions to be only
contingent and unascertained. The appellant has contended that the
above provisions were created in accordance with accounting
principles and standards; the valuation of liabilities was based on
compilation of various details and by adopting actuarial valuation;
the liabilities were 'ascertained' and the Profit & Loss Account was
prepared in accordance part II and III of Schedule-VI of the
Companies Act. Therefore, the book profit declared as per the Profit
and Loss account should have not been disturbed in view of decision
of Hon'ble Apex Court in the case of ApolloTyres Ltd. vs. CIT (255
ITR 273). The reliance has also been placed on the decision of
Hon'ble Supreme Court in the case of Bharat Earth Movers Limited
vs. CIT (112 Taxman 61) and the decision of Hon'ble Mumbai High
Court in the case of CIT vs. Echjay Forgings Pvt. Ltd. (116 Taxman
322) in support of contentions that when the liabilities were
determined on the basis of actuarial calculations, the same
represented ascertained liabilities. The identical issue was also
involved in the case of appellant for A.Y.2008-09 and as per the
detailed discussion vide para 6.1 of my order dated 02.01.2012 in
appeal No.276/2010-11 after considering the provisions of law, legal
position on this issue emanating from relied upon judicial rulings
and the decision of Ld. CIT (Appeals) Faridabad vide order dated
29.04.2010 in appeal No.137/2009-10 for A.Y.2007-08, this issue
was decided in favour of the appellant. Since the issue is already
covered by the decision for earlier years, the AO is directed to
5 ITA No.424/Del./2013
compute the book profit without making any addition for aforesaid
provisions. The addition of Rs.82,57,10,238/- made by the AO for
the purpose of determining book profit u/s 115JB of the Act is
deleted. The ground of appeal is allowed."
7. Aggrieved by the deletion of the said addition made by the AO, the
department is before us.
8. At the outset itself, the ld. AR for the assessee submitted that this
issue is covered in favour of the assessee in assessee's own case in ITA
No.1105/Del/2006 for Assessment Year 2002-03 order dated 21.11.2008
of the Tribunal. He also submitted that further, in assessee's own case in
assessment years 2004-05, 2005-06, 2007-08 and 2008-09, relying on the
order of the Tribunal (supra), the co-ordinate Benches of the ITAT has
decided this issue in favour of the assessee.
9. We have heard the submission and perused the material on record.
The Tribunal in ITA No.1105/Del./2006 for assessment year 2002-03
order dated 21.11.2008 has considered an identical issue and had decided
the matter in favour of the assessee. The aforesaid order of the Tribunal
was followed in subsequent assessment years 2005-06, 2007-08 and 2008-
09. Since identical issue has been considered by the Tribunal in the
aforesaid assessment years and the issue raised before us is covered by the
decision of the coordinate Benches of the Tribunal in assessee's own case
for assessment year 2002-03 (supra), we confirm the order of the ld. CIT
(A) on this issue.
6 ITA No.424/Del./2013
10. Apropos Ground 2 is regarding depreciation on land amortized
while calculating book profits under section 115JB. The AO noticed that
assessee had claimed an amount of Rs. 1,80,79,857/- as per schedule 5 of
the balance sheet on account of depreciation on land unclassified and
leasehold land. Out of the total depreciation on land of Rs. 2,49,92,137/ -,
an amount of Rs. 1,80,79,857/ - had been debited to profit and loss account
and balance amount of Rs.69,12,280/- had been added to the cost of capital
work in progress. The AO confronted the assessee with these facts that
Depreciation on the land was not allowed as per the Companies Act and
accordingly, why the depreciation may not be added back to the shown
book profit to work out the book profit as per Companies Act, 1956. The
assessee replied the same vide submission dated 20.12.2011. The AO
examined the reply submitted by the assessee and observed that as per
schedule XIV of the Companies Act, 1956, no rate of depreciation has
been prescribed for land. He also observed that the case of Apollo Tyres
Ltd. vs CIT (2002) 255 ITR 273 (SC), relied upon by the assessee, did not
apply to the case of assessee. He observed that the Apex Court judgement
clearly says that book profit computed should be in accordance with the
part II and III of Schedule VI to the Companies Act, 1956. He further
observed that as far as Depreciation on land was concerned, it was neither
prescribed in Income Tax Act, 1961 nor in Companies Act, 1956. Hence,
accounts of the company are not in accordance with the provision of part II
7 ITA No.424/Del./2013
and III of Schedule VI of the Companies Act, 1956. Thus, he disallowed
the claim being not in accordance with Companies Act to the extent of
Rs.1,80,79,857/- as this amount has been debited to P & L account and
accordingly, added back to the figure of book profit.
11. While allowing this issue in favour of the assessee, Ld. CIT (A) held
as under :-
"6.1. The ground No. 3 of appeal has been taken against the
disallowance of Rs.l,80,79,857/- on account of amortization of land
(depreciation) while computing book profits u/s 115JB of the Act.
While making the disallowance, the AO's contention has been that
the depreciation on land is neither prescribed under the Income Tax
Act nor in the Companies Act, 1956 and hence, the accounts of the
company were not in accordance with the provision of part II and In
of schedule VI of the Companies Act. The appellant, on the other
hand, has contended that amortization of lease hold land has been
made as per accounting standard 10 of ICAI and amortization of
land unclassified as per Accounting Standard 6 of ICAI and in view
of CAG, which has been done to meet the requirement of companies
Act and amortization of land is permitted u/s 115JB. The identical
issue was also involved in the case of appellant for A.Y.2008-09 and
as per the detailed discussion vide para 6.2 of my order dated
02.01.2012 in appeal No.276/2010-11, this issue has been decided in
favour of the appellant. Since the issue is already covered by the
decision for earlier year, the addition of Rs.1,80,79,857 /- made by
the AO for the purpose of computing book profit u/s 115JB of the
Act is directed to be deleted. The ground No.3 of appeal is allowed."
12. At the outset itself, the ld. AR for the assessee submitted that this
issue is covered in favour of the assessee in assessee's own case in ITA
No.2449/Del/2008 for Assessment Year 2004-05 order dated 30.09.2014
of the Tribunal and took our attention to page 6, para 7 of the order. He
also submitted that the ITAT, relying on the aforesaid order dated
8 ITA No.424/Del./2013
30.09.2014 (supra), has decided this issue in favour of the assessee in
assessee's own case in assessment years 2007-08 and 2008-09.
13. We have heard rival submissions and perused the material on record.
The Tribunal in the order for assessment year 2002-03 (supra) has
considered an identical issue and had decided the matter in favour of the
assessee. The aforesaid order of the Tribunal was followed in subsequent
assessment years 2005-06, 2007-08 and 2008-09. Since identical issue
has been considered by the Tribunal and the issue raised before us is
identical to the issue covered by the coordinate Bench of the Tribunal in
assessee's own case for assessment year 2002-03 (supra) and other years,
respectfully following the same, we confirm the order of the ld. CIT (A) on
this issue.
14. Apropos Ground 3 is regarding disallowance under section 14A of
the Act. The AO noticed from the balance sheet that there were dividend
bearing investments and the assessee earned dividend during the year on
such investments as per following details :-
Name of the Company Investment as on Dividend Received in
31.03.2009 Rs. Rupees
Crores
NHDC 1002.42 50,42,88,000
Power Trading Corp. 12.00 1,20,00,000/-
Indian Overseas Bank 0.36 12,62,800/-
National Power Exchange Ltd. 0.83 -
Total 1015.61 51,75,50,800/-
The AO observed from the aforesaid that the assessee had earned exempt
income to the tune of Rs. 51,75,50,800/ - during the year which was not
9 ITA No.424/Del./2013
includible to the total income and hence was required to disallow expenses
on account of such income as per the provisions of section 14A of the Act.
The AO confronted the assessee and the assessee informed that a
disallowance of Rs.13.78 Crores had already been made on this account.
According to the AO, the said disallowance of expenditure made by the
assessee was not satisfactory and hence, he asked assessee again to show
cause vide order sheet entry dated 20.12.2011 as to why appropriate
disallowance as per the provisions of section 14A be not made. The AO
also asked the assessee to file computation as per Rule 8D of the Income-
tax Rules, 1962 (hereinafter `the Rules) as provided under the provisions
of section 14A for this purpose. In response, the assessee filed a reply vide
letter dated 23.12.2011. The AO after going through the reply filed by the
assessee observed that that by applying Rule 8D, the quantum of
disallowance comes at Rs.29.75 Crores as against which the assessee has
made a disallowance of Rs. 13.78 Crores. Accordingly, the AO computed
disallowance as per Rule 8D of Rs.15.97 Crores (i.e. Rs.29.75 Rs.13.78
= Rs.15.97 crores). However, the AO made disallowance of Rs.5.08
crores (i.e. 0.5% of the total investment which is Rs.1015.20 crores) under
the provisions of section 14A of the Act and accordingly, made an addition
of Rs.5.08 Crores.
15. Aggrieved, the assessee filed an appeal before the CIT (A) and the
CIT (A) deleted the addition by observing as under :-
10 ITA No.424/Del./2013
"6.2. In ground No.5 of appeal, the appellant has challenged the addition
of Rs.15,97,10,866/- made by invoking the provisions of section 14A of
the Act while computing regular income of the assessee. There is no
dispute to the fact that the appellant has declared dividend income of
Rs.51.75 crores which has been claimed exempt. The said dividend
income has been earned from the investment in shares of the entities as
under:
1. NHDC Rs.1002.42 crores
2. Power Trading Corporation Rs. 12.00 crores
3. Indian Overseas Bank Rs. 0.36 crores
4. National Power Exchange Ltd. Rs. 0.83 crores
Total Rs.1015.61 crores
The NHDC is a subsidiary company of the assessee in which investment
has been made as per the sanction order of Govt. of India, Ministry of
Power, vide DO No.22/3/2000/28.3.2002 and order
No.34/1/2003/DO/NHPC dated 29.5.2003, out of budgetary support and
equity capital invested by the Govt. to the extent of Rs.772.42 crores. The
balance investment of Rs.230.00 crores has been made in the shares of
subsidiary company out of funds raised from the issue of 'O' series bonds.
The interest and bond issue expenses aggregating to Rs.13.78 crores
consisting of interest of Rs.13.67 crores calculated at the rate of 7.7%
applicable to bonds and bond issue / service charges of Rs.10.27 lacs in
respect of investment of Rs.230.00 crores have already been disallowed by
the assessee u/s 14A of the Act. The investment of Rs.12.00 crores in the
shares of PTC, Rs.36.00 lacs in the shares of Indian Overseas Bank and
Rs.83.00 lacs in the shares of National Power Exchange has been stated to
be out of internal accruals. The necessary details and submissions in this
regard were filed by the assessee but the AO did not consider the suomoto
disallowance made by the assessee as satisfactory and in accordance with
Rule 8D of the Income Tax Rules, 1962. The AO has therefore, applied
Rule 8D and worked out the disallowance of Rs.0.10 crores, 24.57 crores
and Rs.5.08 crores, aggregating to Rs.29.75 crores, under clause (i), (ii)
and (iii) of Sub-Rule (2) of Rule 8D, respectively. The fact that the
investment of Rs.772.42 crores made by the appellant in the shares of
subsidiary company NHDC was out of budgetary support and equity
contribution by the Govt. of India has not been disputed by the AO. The
admitted fact therefore, remains that the investment of Rs.772.42 crores
was directly from interest free funds contributed by the Govt. of India. If
that being so, this amount cannot go into the working of disallowance of
interest even if Rule 8D is applied. Clause (ii) of Sub-Rule (2) of Rule 8D
provides for working of disallowable interest in a case where the assessee
has incurred expenditure by way of interest during the previous year
which is not directly attributable to any particular income or receipt. Thus,
there is no direct interest expenditure for the investment of Rs.772.42
crores and the direct interest expenditure of Rs.13.78 crores pertaining to
investment of Rs.230.00 crores in the shares of NHDC has already been
disallowed by the appellant. The Hon'ble ITAT, Bench 'F' Delhi in the
case of Priya Exhibitors Pvt. Ltd. vs. ACIT (27 taxmann.com 88) has held
11 ITA No.424/Del./2013
that the disallowance under section 14A requires a clear finding of
incurring of expenditure and in absence of same, no disallowance could be
made. Similarly, the Hon'ble ITAT, Bench 'G' Delhi in the case of ACIT
VS. SIL Investment Ltd. (26 taxmann.com 78) has held that where
Assessing Officer did not bring any evidence on record to establish that
any expenditure had been incurred by assessee for earning exempt income,
it was wrong on part of Assessing Officer to proceed to compute
disallowance of expenses under section 14A by merely applying rule
8D(2)(iii). The legal implications of sub-section (2) and (3) of section 14A
have been examined by the Hon'ble Delhi High Court in Maxopp
Investment Ltd. vs. CIT (347 ITR 272) and it has been decided in para 29
of the order as under:
"29. Sub-section (2) of Section 14 A of the said Act provides the
manner in which the Assessing Officer is to determine the amount
of expenditure incurred in relation to income which does not form
part of the total income. However, if we examine the provision
carefully, we would find that the Assessing Officer is required to
determine the amount of such expenditure only if the Assessing
Officer, having regard to the accounts of the assessee, is not
satisfied with the correctness of the claim of the assessee in respect
of such expenditure in relation to income which does not form part
of the total income under the said Act. In other words, the
requirement of the Assessing Officer embarking upon a
determination of the amount of expenditure incurred in relation to
exempt income would be triggered only if the Assessing Officer
returns a finding that he is not satisfied with the correctness of the
claim of the assessee in respect of such expenditure. Therefore, the
condition precedent for the Assessing Officer entering upon a
determination of the amount of the expenditure incurred in relation
to exempt income is that the Assessing Officer must record that he
is not satisfied with the correctness of the claim of the assessee in
respect of such expenditure. Sub-section (3) is nothing but an
offshoot of sub-section (2) of Section 14A. Sub-section (3) applies
to cases where the assessee claims that no expenditure has been
incurred in relation to income which does not form part of the total
income under the said Act. In other words, sub-section (2) deals
with cases where the assessee specifies a positive amount of
expenditure in relation to income which does not form part of the
total income under the said Act and sub-section (3) applies to cases
where the assessee asserts that no expenditure had been incurred in
relation to exempt income. In both cases, the Assessing Officer, if
satisfied with the correctness of the claim of the assessee in respect
of such expenditure or no expenditure, as the case may be, cannot
embark upon a determination of the amount of expenditure in
accordance with any prescribed method, as mentioned in sub-
section (2) of Section 14A of the said Act It is only if the
Assessing Officer is not satisfied with the correctness of the claim
of the assessee, in both cases, that the Assessing Officer gets
jurisdiction to determine the amount of expenditure incurred in
12 ITA No.424/Del./2013
relation to such income which does not form part of the total
income under the said Act in accordance with the prescribed
method. The prescribed method being the method stipulated in
Rule 80 of the said Rules. While rejecting the claim of the assessee
with regard to the expenditure or no expenditure, as the case may
be, in relation to exempt income, the Assessing Officer would have
to indicate cogent reasons for the same."
It is however, observed from para 5 of the assessment order that the AO
has not assigned any reason while finding the submissions of the appellant
as unsatisfactory. The identical issue was also involved in the case of
appellant for A.Y. 2008-09 and as per the detailed discussion vide para 6.4
of my order dated 02.01.2012 in appeal No.276/2010-11 after considering
the provisions of law and legal position emanating from relied upon
judicial rulings, this issue has been decided in favour of the appellant.
Since the issue is already covered by the decision for earlier year, the
addition of Rs.15,97,10,866/- made by the AO by invoking section 14A of
the Act is directed to be deleted. The ground No. 5 of appeal is allowed."
16. Aggrieved by the impugned order of the CIT(A), the Revenue is
before us. The ld DR, supported the order of the AO, and took us to the
same and argued that since admittedly the assessee is in receipt of exempt
income, the AO, rightly invoked Rule 8D, to disallow expenditure as
mandated by the Rule. So, he wants us to reverse the order of CIT(A) and
restore the order of AO. On the other hand, Ld. AR for the assessee
submitted that the assessee has suo motu disallowed an amount of
Rs.13.78 crores. He submitted that the AO made computation as per Rule
8D, which came to Rs.29.75 crores and he made disallowance of Rs.15.97
crores. Ld. AR submitted that this issue is covered in favour of assessee in
assessee's own case for the AY 2008-09 in ITA No.1402/Del./2012 dated
17.10.2014. He further submitted that without prejudice to aforesaid
decision of the Tribunal on this issue, the disallowance made by AO
13 ITA No.424/Del./2013
invoking the provisions of section 14A read with Rule 8D, rejecting the
disallowance made by the assessee suo motu, without giving any reason
why the amount disallowed by the assessee himself is not satisfactory. He
submitted that it is a settled position that before invoking the provisions of
Rule 8D, the AO has to record an objective satisfaction with regard to the
disallowance made by assessee not being satisfactory, which has not been
done in this case. He further submitted that this issue is squarely covered
with the judgment of Hon'ble jurisdictional High Court in the case of CIT
Vs Taikisha Engineering India Ltd. (2015) 370 ITR 338 (Del). He also
relied on the decision of ITAT, Pune Bench in the case of Kalyani Steels
Ltd vs. ACIT, ITA No.1733/PN/2012 dated 30.01.2014. Ld. AR further
relied on the decision of ITAT, Pune Bench in the case of Bharat Forge
Ltd. vs. ACIT in ITA No.795/PN/2013 Dated 30.05.2014. He also relied
upon seven more judgments/orders in this regard. So, he does not want us
to interfere in the order of ld CIT(A).
17. We have heard both the parties and perused the records. We find
that the assessee has earned exempt income to the tune of
Rs.51,75,50,800/- and has suo motu disallowed Rs.13.78 crores under
section 14A of the Act. We find that the AO has invoked Rule 8D without
spelling out the reason for not being satisfied with the computation made
by the assessee in respect to expenditure incurred for earning the exempt
income. Without recording the objective satisfaction as required under
14 ITA No.424/Del./2013
sub-section (2) to section 14A that he is not satisfied with the correctness
of the claim of the assessee in respect of expenditure in respect to exempt
income, the AO cannot invoke Rule 8D to compute the disallowance under
the said Rule. The Hon'ble jurisdictional High Court in the case of CIT vs.
Taikisha Engineering India Limited reported in 370 ITR 338 (Del.) has
held as under :-
"Section 14A of the Act postulates and states that no deduction
shall be allowed in respect of expenditure incurred by an assessee
in relation to income which does not form part of the total income
under the Act. Under sub Section (2) to Section 14A of the Act, the
Assessing Officer is required to examine the accounts of the
assessee and only when he is not satisfied with the correctness of
the claim of the assessee in respect of expenditure in relation to
exempt income, the Assessing Officer can determine the amount of
expenditure which should be disallowed in accordance with such
method as prescribed, i.e. Rule 8D of the Rules (quoted and
elucidated below). Therefore, the Assessing Officer at the first
instance must examine the disallowance made by the assessee or
the claim of the assessee that no expenditure was incurred to earn
the exempt income. If and only if the Assessing Officer is not
satisfied on this count after making reference to the accounts, that
he is entitled to adopt the method as prescribed i.e. Rule 8D of the
Rules. Thus, Rule 8D is not attracted and applicable to all assessee
who have exempt income and it is not compulsory and necessary
that an assessee must voluntarily compute disallowance as per Rule
8D of the Rules. Where the disallowance or "nil" disallowance
made by the assessee is found to be unsatisfactory on examination
of accounts, the assessing officer is entitled and authorised to
compute the deduction under Rule 8D of the Rules. This pre-
condition and stipulation as noticed below is also mandated in sub
Rule (1) to Rule 8D of the Rules."
After going through the other cases also, relied upon by the ld. AR, we
find that the AO has not recorded the satisfaction envisaged by the statute
before invoking the computation provided for under Rule 8D, which
15 ITA No.424/Del./2013
vitiates the impugned order. We also find that in assessee's own case for
the previous year also, the Tribunal has deleted the addition made by the
AO on this account. Therefore, we uphold the order of the CIT (A) on this
issue. This ground of revenue's appeal is dismissed.
18. In the result, the appeal of the revenue is dismissed.
Order pronounced in open court on this 26th day of August, 2015.
Sd/- sd/-
(S.V. MEHROTRA) (A.T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 26th day of August, 2015
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A), Faridabad.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.
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