CEBON APPAREL P.LTD, MUMBAI V. DCIT 6(2), MUMBAI

ITA 1651/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6851 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: SUNIL A DESAI
• Keywords: Retrospective amendment
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 1651/MUM/2016 ASSESSMENT YEAR : 2008 09 M/S. CEBON APPAREL PVT. LTD., UNIT NO.1, NIRMAN KENDRA DR. E. MOSES ROAD MAHALAXMI MUMBAI 400 011 PAN: AAACC2088B VS. DCIT 6(2) ROOM NO.504, AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 (APPELLANT) RESPONDENT) APPELLANT BY : SHRI SUNIL A DESAI, A.R. RESPONDENT BY : SHRI M.C. OMI NINGSHEN, D.R. DATE OF HEARING : 16/05/2018 DATE OF PRONOUNCEMEN T : 29/05/2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 19/01/2016, PASSED BY THE CIT( A)- I2, MUMBAI, FOR THE ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER:- 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MA DE BY WAY OF DISALLOWANCE UNDER SECTION 40(A) IN RESPECT OF EXPE NDITURE INCURRED ON (A) ADVERTISEMENT OF RS. 93,50,396/- AND; (B) CONSULTANCY FEES OF RS. 14,47,396/- IN RELATION TO BUSINESS OF THE APPELLANT CARRIED OU T OUTSIDE INDIA. ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 2 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A OF INCOME TAX ACT, AMOUNTING TO RS. 590,654/-. 3. THE APPELLANT COMPANY CRAVES YOUR LEAVE TO ADD, ALTER, MODIFY, DELETE OR AMEND ANY OF THE ABOVE MENTIONED GROUNDS OF APPEAL. 3. THE ISSUE RAISED IN THE FIRST GROUND OF APPEAL I S AGAINST THE CONFIRMATION OF DISALLOWANCE IN RESPECT OF ADVERTIS EMENT EXPENDITURE OF RS.93,50,396/- AND PROFESSIONAL AND CONSULTANCY FEE OF RS.14,47,396/- BY CIT(A) AS MADE BY THE AO U/S.40(A)(I) OF THE ACT BY IGNORING THE FACTS THAT THESE PAYMENTS WERE MADE BY THE ASSESSEE FOR THE SE RVICES RENDERED OUTSIDE INDIA TO NON-RESIDENTS. 4. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS INCURRED EXPENSES OF RS.93,50,396/- ON ADVERTISEMENT IN FOREIGN MAGAZINE S AND WEBSITES ON WHICH NO TAX HAS BEEN DEDUCTED AT SOURCE AND ACCORDINGLY ISSUED A SHOW-CAUSE NOTICE AS TO WHY THE SAID EXPENSES SHOULD NOT BE DI SALLOWED U/S.40(A)(I) OF THE ACT. THE ASSESSEE REPLIED THE SHOW-CAUSE NOTICE VIDE LETTER DATED 22/11/2010 BY SUBMITTING THAT ADVERTISEMENT EXPENDI TURE WAS INCURRED IN CONNECTION WITH THE ADVERTISEMENTS IN FOREIGN MAGAZ INES AND WEBSITES AND THE RECIPIENTS WERE NOT HAVING PERMANENT ESTABLISHM ENT / BUSINESS CONNECTION IN INDIA AND THUS NO TAX AT SOURCE WAS R EQUIRED TO BE DEDUCTED AT SOURCE. AS REGARDS PAYMENTS FOR PROFESSIONAL AND CO NSULTANCY FEE, THE ASSESSEE SUBMITTED THAT THESE WERE MADE TO FOREIGN RESIDENTS FOR RENDERING ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 3 CONSULTANCY SERVICES IN UK AND THOUGH THE PROFESSI ONAL AND TECHNICAL SERVICES WERE WITHIN THE DEFINITION OF FEE FOR TECH NICAL SERVICES AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII)(B) OF THE ACT, N O TAX WAS DEDUCTIBLE ON PROFESSIONAL AND CONSULTANCY FEE AS THE SAME IS COV ERED BY THE EXCLUSION PROVIDED IN SECTION 9(1)(VII)(B) OF THE ACT. HOWEVE R, THE CONTENTION OF ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND THE AO OBSERVED THAT TECHNICAL SERVICES IN UK BRANCH WERE UTILISED IN THE BUSIN ESS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT ASSESSEE IS AN INDIAN COMPAN Y HAVING ITS REGISTERED OFFICE IN INDIA TO HANDLE ITS EXPORT BUSINESS. ALL THEIR MANUFACTURING ACTIVITIES WERE CARRIED OUT IN INDIA AS THE PRODUCTION UNIT, W ARE HOUSE AND GODOWNS ARE LOCATED IN INDIA AND AS SUCH THE EXCLUSION PROVIDED U/S. 9(1)(VII)(B) IS NOT APPLICABLE. THE AO FURTHER OBSERVED THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT W.E.F. 01/06/1976, IN SECTION 9 BROUGHT O UT BY THE FINANCE ACT 2010, IT IS NO LONGER NECESSARY THAT IN ORDER TO AT TRACT TAXABILITY IN INDIA, THE SERVICES MUST BE RENDERED IN INDIA. ACCORDING TO AO , UTILISATION OF SERVICES IN INDIA IS ENOUGH TO ATTRACT ITS TAXABILITY IN INDIA. FINALLY, THE AO ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE U/S.40(A)(I) O F THE ACT. IN THE APPELLATE PROCEEDINGS, CIT(A) DISMISSED THE APPEAL OF THE ASS ESSEE BY HOLDING AND OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND THE REASONS RECORDED BY THE ASSESSING OFFICER FOR DISALLOWANCE IN THE ASSESSMENT ORDER. THE APPELLANT HAS NOT DISPUTED THAT THE ADVE RTISEMENT MADE THROUGH THE NON RESIDENT IS NOT AVAILABLE IN THE IN DIAN TERRITORY. THE MAGAZINES AS WELL AS THE WEBSITES CAN BE VIEWED IN THE INDIAN GEOGRAPHY. HENCE, I DO NOT FIND FORCE IN THE SUBMISSION OF THE APPELLANT THAT THE ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 4 EXPENSES ON ADVERTISEMENT AND PROFESSIONAL FEE WAS FOR THE UK BRANCH ONLY. AS THE SERVICES ARE AVAILABLE IN INDIA, SECTI ON 9(1) (I) IS APPLICABLE. THE APPELLANT'S STAND THAT THESE PAYMENTS ARE NOT D EEMED TO ARISE IN INDIA IN VIEW OF SECTION 9(L)(C) IS NOT TENABLE. IT IS SE EN THAT SECTION 9(L)(C) COVERS THOSE CASES WHICH CONFINES TO THE COLLECTION OF NEWS AND VIEWS IN INDIA FOR TRANSMISSION OUT OF INDIA. IN THE INSTANT CASE THE ADVERTISEMENT IS NOT THE NEWS AND IT WAS NOT ONLY FOR TRANSMISSION O UT OF INDIA BUT IT IS ALSO AVAILABLE IN INDIA. HENCE IN MY OPINION SECTION 9(L )(I) IS APPLICABLE IN THE PRESENT CASE. THE APPELLANT HAS ALSO SUBMITTED THAT IN VIEW OF SECTION 9(L)(VI)( B THE PAYMENT MADE BY RESIDENT IN INDIA F OR THE SERVICES UTILISED IN THE BUSINESS OR PROFESSION CARRIED OUT OUTSIDE I NDIA , THE DEEMING PROVISION IS NOT ATTRACTED. BUT, IN THE INSTANT CAS E, SERVICES ARE AVAILABLE IN INDIA AND IT WAS ALSO RECORDED BY THE ASSESSING OFFICER. ACCORDINGLY SECTION 9(L)(VI) I ALSO ATTRACTED FOR PAYMENT OF PR OFESSIONAL FEES. IN VIEW OF THE ABOVE, SECTION 195 IS APPLICABLE IN THE INSTANT CASE AND IS ALSO READ AS UNDER FOR READY REFERENCE : 195 . [(1) ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTEREST 37 [***] OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BEING INCOME CHARGE ABLE UNDER THE HEAD 'SALARIES'38 (***]) SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WH ICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : (2) WHERE THE PERSON RESPONSIBLE FOR PAYING ANY SUC H SUM CHARGEABLE UNDER THIS ACT (OTHER THAN 41 ***; 42 -***43 **44 *** SALARY) TO A NON RESIDENT CONSIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE INCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAK E AN APPLICATION TO THE [ASSESSING] OFFICER TO DETERMINE, [BY GENERAL OR SP ECIAL ORDER], THE APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE, A ND UPON SUCH DETERMINATION, TAX SHALL BE DEDUCTED UNDER SUB-SEC TION (1) ONLY ON THAT PROPORTION OF THE SUM WHICH IS SO CHARGEABLE. 47(***) IN THE CASE HERE, THE APPELLANT HAS MADE PAYMENT TO THE NON RESIDENT. THE SECTION APPLIES TO ANY SUM CHARGEABLE UNDER THE PROVISION OF THIS ACT TO THE NON RESIDENT. FROM THE PLAIN READIN G OF THE SAID SECTION IT CAN BE CLEARLY SEEN THAT IF THE PAYMENT IS MADE TO A NON RESIDENT, WHETHER IT IS IN INDIA OR OUTSIDE INDIA OR IN ANY MANNER, T HE PERSON MAKING PAYMENT IS LIABLE FOR DEDUCTING TAX AT SOURCE. IF T HE PERSON HAS ANY DOUBT FOR DEDUCTION OF TAX, THEN HE SHOULD APPROACH THE A SSESSING OFFICER AS PROVIDED IN SECTION 195(2). FURTHER, THE HON'BLE SU PREME COURT IN THE CASE OF TRANSMISSION CORP. OF A.P. LTD.( 239 ITR 58 7) HAS HELD THAT IF THE ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 5 ASSESSEE HAS MADE NO APPLICATION UNDER SECTION 195 (2), THEN TAX MUST BE DEDUCTED UNDER SECTION 195(1). IN VIEW OF THE ABOVE THE APPELLANT IS LIABLE TO DED UCT TAX AT SOURCE AS PROVIDED IN SECTION 195 OF THE ACT AND THEREFORE AS THE SAME IS NOT DEDUCTED ALL PROVISIONS OF SECTION 40(A)(I)(A) IS A TTRACTED. UNDER THE ABOVE MENTIONED FACTS AND CIRCUMSTANCES, IT IS FOUND THAT THE AO HAS CORRECTLY MADE THE DISALLOWANCE AND ACCORDINGLY GROUNDS OF APPEAL NO 1 AND 2 ARE DISMISSED . 5. LEARNED AR VEHEMENTLY SUBMITTED BEFORE US THAT T HE FIRST APPELLATE AUTHORITY HAS COMPLETELY ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION AS MADE BY THE AO IN RESPECT OF ADVERTISEMENT AMOUN TING TO RS.93,50,396/- IN FOREIGN MAGAZINES AND WEBSITES AND RS.14,47,091/ - TOWARDS PROFESSIONAL AND CONSULTANCY FEE PAID TO FOREIGN NATIONALS BY TH E UK BRANCH OF THE ASSESSEE. ASSESSEE SUBMITTED THAT THE NEWSPAPER AGE NCIES, THE PUBLISHING HOUSES TO WHOM THE PAYMENTS OF RS.93,50,396/- WAS MADE IN RESPECT OF BRAND OF CYBER JAMMIES WHICH IS THE ASSESSEES BUS INESS CARRIED OUT OUTSIDE INDIA IN UK AND THE GARMENTS UNDER THE BRAN D NAME OF CYBER JAMMIES WERE SOLD OUTSIDE INDIA AND NOT IN INDIA AT ALL. 6. LEARNED COUNSEL SUBMITTED THAT NO ONE IN INDIA O R IN ASIA AND OTHER CONTINENTS OTHER THAN EUROPE CAN PLACE THE ORDER ON NET FOR THESE GARMENTS. IT IS THE ONLY PEOPLE LIVING IN UK AND EUROPE CAN PLAC E THE ORDER AND TAKE THE DELIVERY OF THE GARMENTS. THE SAID BRAND IS REGISTE RED IN UK UNDER TRADE NAME OF CYBER JAMMIES AND IT IS NOT DISPUTED TH AT ASSESSEE HAS BUSINESS OUTSIDE INDIA. ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 6 7. LEARNED AR SUBMITTED THAT ALL THESE RECIPIENTS, NEWS PAPER AGENCIES, PUBLISHING HOUSES HAVE NO PERMANENT PLACE IN INDIA AND THEY ARE ALL FOREIGN COMPANIES WHICH ARE NON-RESIDENT AS PER THE PROVISI ONS OF THE ACT AND SERVICES OF ADVERTISEMENT WERE RENDERED BY THESE EN TITIES OUTSIDE INDIA AND THEREFORE, THE INCOME OF THE PUBLISHING HOUSES ARE NOT CHARGEABLE TO TAX IN INDIA AND CONSEQUENTLY NO TAX IS REQUIRED TO BE DED UCTED AT SOURCE. LEARNED COUNSEL ALSO REFERRED TO THE COPIES OF ADVERTISEMEN T IN RESPECT OF CYBER JAMMIES GARMENTS IN FOREIGN MAGAZINES AS PLACED IN THE PAPER BOOK. IN RESPECT OF THE DISALLOWANCE OF RS.14,47,091/-, LEAR NED COUNSEL SUBMITTED THAT THE SAID PAYMENT WAS MADE TO FOREIGN NATIONAL FOR O BTAINING CONSULTANCY IN UK IN RESPECT OF REGISTRATION OF TRADE MARK OF CYBE R JAMMIES IN UK AS PICTON HOWELL LLP AND CONSULTANT MR. MARK TWEED RENDERED THE SERVICES IN UK BRANCH WHICH A SEPARATE BUSINESS ACTIVITY CARRIED O N OUTSIDE INDIA AND THEREFORE, PAYMENT OF THESE PARTIES ARE NOT SUBJECT TO ANY TAX IN INDIA. THE ASSESSEE SUBMITTED THAT A SEPARATE BALANCE SHEET IN RESPECT OF UK BRANCH IS PREPARED AND ASSESSEE HAS FILED A SEPARATE CORPORAT ION TAX RETURN IN UK, A COPY OF BALANCE SHEET OF UK BRANCH IS FILED AT PAG E 198 TO 203 OF THE PAPER BOOK. FINALLY, LEARNED AR SUBMITTED THAT SINCE THE PAYMENTS WERE MADE BY THE UK BRANCH IN RESPECT OF SERVICES WHICH ARE AVA ILED IN UK AND THEREFORE, NO TDS IS LIABLE TO BE DEDUCTED UNDER THE SAID PAYM ENTS AND CONSEQUENTLY THE DISALLOWANCE AS MADE BY THE AO ON ACCOUNT OF TH ESE TWO HEADS NEEDS TO BE DELETED. ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 7 8. LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS BEEN CARR YING ON BUSINESS IN INDIA AND THEREFORE THE TDS WAS REQUIRED TO BE DEDU CTED IN INDIA. IN SO FAR AS THE EXPENSES ON ADVERTISEMENT IN FOREIGN PRINT HOUS ES AND MAGAZINES ARE CONCERNED , THE LD DR ARGUED THAT ADMITTEDLY THE P RODUCTION UNIT WAS LOCATED IN INDIA AND THEREFORE THE TDS HAS TO BE DEDUCTED. SECONDLY ON THE CONSULTANCY AND TECHNICAL FEE, LD DR SUBMITTED THAT RETROSPECTIVE AMENDMENT IN SECTION 9 W.E.F. 1 ST JUNE , 1976, IT IS NOT NECESSARY THAT SERVICES ARE TO BE RENDERED IN INDIA. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IN THE PRESENT CASE, THE ASSESSEE HAS A UK BRANCH AND IS DOING BUSINESS ABROAD UNDER THE BRAND NAME OF CYBER JIMMIES IN UK. THE UK BRANCH DURING THE YEAR INCURRED AND PAID RS.93,5 0,396/- BY WAY OF ADVERTISEMENT EXPENDITURE TO FOREIGN MAGAZINES AND PUBLISHING HOUSES FOR ADVERTISEMENTS ITS BRAND CYBER JIMMIES, THE COPIES OF THE ADVERTISEMENTS WERE ALSO PLACED IN PAPER BOOK. SIMILARLY ASSESSEE PAID A SUM OF RS.14,47,091/- TO FOREIGN CONSULTANT MR. MARK TWEED FOR RENDERING SERVICES IN UK IN CONNECTION WITH REGISTRATION OF TRADE MARK OF CYBER JIMMIES IN UK. WE OBSERVE FROM THE RECORD BEFORE US THAT BOTH THESE P AYMENTS WERE MADE BY THE UK BRANCH OF THE ASSESSEE WHICH WAS SEPARATE B ALANCE SHEET, P & L ACCOUNT AND FILED RETURN OF INCOME IN UK AND THUS T HESE FOR SERVICES WERE ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 8 RENDERED BY THE FOREIGN RESIDENTS OUTSIDE INDIA HAV ING NO PE IN INDIA. WE ARE NOT IN AGREEMENT WITH THE CIT(A) ON THIS ISSUE THA T SECTION 9(1) IS APPLICABLE. CIT(A) ALSO NOTED THAT ASSESSEE HAS NOT MADE ANY AP PLICATION U/S.195(2) OF THE ACT AND THEREFORE, THE TAX MUST BE DEDUCTED U/ S.195(1) OF THE ACT. HOWEVER, ON THE PERUSAL OF RULE 37BB WHICH IN RESPE CT OF FURNISHING OF INFORMATION FOR PAYMENTS IN FOREIGN CURRENCY MADE T O NON-RESIDENTS NOT BEING A COMPANY OR TO A FOREIGN COMPANY THE PROVISIONS OF 195(6) ARE EFFECTIVE W.E.F. 01/07/2009. ACCORDINGLY, THE FORM NO.15 CA A ND 15CB WERE NOT REQUIRED TO BE GIVEN IN RESPECT OF PAYMENTS TO NON- RESIDENT INDIANS FOR THE CURRENT YEAR. 10. CONSIDERING THE FACTS OF THE ASSESSEE IN LIGHT OF THE ABOVE DISCUSSION , WE ARE OF THE VIEW THAT NO TDS IS REQUIRED TO BE DE DUCTED ON THE PAYMENT OF ADVERTISEMENT EXPENSES AND TECHNICAL AND PROFESSION AL CHARGES TO FOREIGN NATIONAL AS THESE RECIPIENTS WERE FOREIGN RESIDENTS HAVING NO PE IN INDIA AND THE SERVICES WERE ALSO RENDERED BY THEM OUTSIDE IND IA. WE, THEREFORE , SET ASIDE THE ORDER OF CIT(A) BY HOLDING THAT NO TAX AT SOURCE IS REQUIRED TO BE DEDUCTED AT SOURCE. THE AO IS DIRECTED ACCORDINGLY. 11. THE ISSUE RAISED IN SECOND GROUND OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS. 590,654/- BY CIT(A) AS MADE BY THE AO U/S.14A OF THE IT ACT. 12. FACTS IN BRIEF ARE THAT DURING THE ASSESSMENT P ROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAS EARNED INCOME OF RS.1,30 ,92,679/- ON ACCOUNT OF ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 9 EXEMPT DIVIDEND INCOME. THE AO ASKED THE ASSESSEE T O FURNISH THE CALCULATION OF DISALLOWANCE U/S.14A R.W.RULE 8D WHI CH WAS FURNISHED BY THE ASSESSEE VIDE LETTER DATED 06/08/2010 WHICH HAD BEE N REPRODUCED IN PARA 5 OF THE ASSESSMENT ORDER. THEREAFTER, AO NOTED THAT SINCE THE ASSESSEE HAS SUO MOTTO DISALLOWED A SUM OF RS.2,58,373/- U/S.14 A OF THE ACT , A BALANCE DISALLOWANCE OF RS.5,90,654 WAS REQUIRED TO BE MADE . THE AO CALCULATED THE SAID DISALLOWANCE BY SUBTRACTING THE RS. 2,58,373/- FROM RS.8,49,027/- WHICH IS CALCULATED BY THE ASSESSEE AS PER LETTER DATED 06/08/2010 U/S.14A R.W.RULE 8D AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THA T THE ASSESSEE MIGHT HAVE INCURRED EXPENSES IN RELATION TO THE SAID EXEM PT INCOME. 13. LEARNED AR VEHEMENTLY SUBMITTED BEFORE US THAT THE AO HAS SIMPLY CALLED FOR THE WORKING OF DISALLOWANCE UNDER RULE 8 D R.W.S.14A OF THE ACT WHICH WAS FILED BY THE ASSESSEE VIDE LETTER DATED 0 6/08/2010 CALCULATING DISALLOWANCE OF RS.8,49,027/- BUT NEVER AGREED TO THIS DISALLOWANCE OF RS. 8,49,027/-. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS SUOMOTO DISALLOWED RS.2,58,373/- U/S.14A. LEARNED AR CONTENDED THAT AO HAS NOT RECORDED HIS SATISFACTION WHICH IS MANDATORY IN TERMS OF PROVISI ON OF SECTION 14A AS TO THE REASON FOR WHICH THE DISALLOWANCE AS MADE BY THE AS SESSEE IS NOT ACCEPTABLE OR INCORRECT. ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 10 14. LEARNED AR SUBMITTED THAT SINCE RECORDING OF SA TISFACTION IS MANDATORY AS PER THE PROVISION OF SECTION 14A AND INVOCATION OF SECTION 14A R.W.RULE 8D WITHOUT SATISFACTION IS BAD IN LAW. THE LD AR RE LIED ON THE DECISION OF THE APEX COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 I N DEFENSE OF HIS ARGUMENTS. FINALLY, LEARNED AR PRAYED THAT THE ORDER OF CIT(A) ON THIS ISSUE DESERVED TO BE REVERSED AS THE SAME IS AGAINS T THE PROVISION OF THE ACT. 15. LEARNED DR ON THE OTHER HAND RELIED ON THE ORDE R OF THE AUTHORITIES BELOW . 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASE LAWS CITED BY THE ASSESSE E. WE FIND FROM THE PERUSAL OF ASSESSMENT ORDER THAT AO HAS NOT RECORDE D ANY SATISFACTION AT ALL BEFORE INVOKING OF PROVISION OF SECTION 14A R.W.RUL E 8D WHICH IS A MANDATORY REQUIREMENT IN TERMS OF PROVISIONS OF SECTION 14A O F THE ACT AND THEREFORE, DISALLOWANCE MADE BY THE AO ON ACCOUNT OF 14A R.W.R ULE 8D AND SUBSEQUENT CONFIRMATION BY THE CIT(A) CANNOT BE SUSTAINED. IN VIEW OF THE SAID ORDER OF CIT(A), WE DIRECT THE AO TO DELETE THE ADDITION AS THE CASE OF ASSESSEE IS SQUARELY COVERED BY THE CASE OF GODREJ & BOYCE MAN UFACTURING CO. LTD., VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) IN WHICH IT HAS BEEN HELD THAT RECORDING OF SATISFACTION IS MANDATORY REQUIREMENT WITHOUT WHICH THE PROVISION SECTION 14A R.W.RULE 8D CANNOT BE APPLIED. THEREFO RE , WE SET ASIDE THE ORDER OF CIT(A) AND WE DIRECT THE AO TO DELETE THE DISALLOWANCE. ITA NO.1651/MUM/2016 M/S. CEBON APPAREL PVT. LTD., . 11 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9/05/2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED : 29/05/2018. KARUNA, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, , ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI