Atul Auto Limited, RAJKOT-GUJARAT V. The Dy. Commr. of Income Tax, Cir.-1(1), RAJKOT-GUJARAT

ITA 214/RJT/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1483 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 12-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revised return; TDS; Rule 8D; Set aside
• Section: 139; 143(3); 10AA; 14A; 139(5); 10B; 80IA; 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (THROUGH VIRTUAL COURT) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI T. R. SENTHIL KUMAR, JUDICIAL MEMBER I.T.A. No.214/Rjt/2016 (Assessment Year: 2012-13) Atul Auto Ltd. Plot No. 1 to 4, Survey No. 86, Nr. Microwave Towers, NH 8B, Shapar Veraval, Tal: Kotda Sangani, Rajkot-360002 Vs. DCIT Circle-1(1), Rajkot [PAN No.AACCA3018M] (Appellant) .. (Respondent) I.T.A. No.251/Rjt/2016 (Assessment Year: 2012-13) DCIT Circle-1(1), Rajkot Vs. Atul Auto Ltd. Plot No. 1 to 4, Survey No. 86, Nr. Microwave Towers, NH 8B, Shapar Veraval, Tal: Kotda Sangani, Rajkot- 360002 [PAN No.AACCA3018M] (Appellant) .. (Respondent) Appellant by : Shri Kapil Sanghvi, A.R. Respondent by : Shri S. S. Rathi, Sr. DR Date of Hearing 18/05/2022 Date of Pronouncement 23/05/2022 O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: These are the cross appeals one filed by the assessee in ITA No. 214/Rjt/2016 and another filed by Revenue in ITA No. 251/Rjt/2016 - 2 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 against order dated 28.04.2016 passed by the Commissioner of Income Tax (Appeals)-1, Rajkot (in short “CIT(A))” relating to the Assessment Year 2012-13, as against the assessment order dated 27.03.2015 passed by the DCIT, Circle-1(1), Rajkot under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The Ld. Counsel for the assessee at the outset informed that he is not pressing the ground in ITA No. 214/Rjt/2016. The sole ground raised by the assessee is disallowance of unpaid leave salary of Rs. 26,62,000/- and thereby permitted to withdraw the appeal filed by the assessee. Recording the above statement, the appeal filed by the assessee is hereby dismissed. 3. The grounds of appeal raised by the Revenue in ITA No. 251/Rjt/2016 is as follows: “1. The Hon’ble CIT(A)-1, Rajkot has erred in law and on facts of the case in deleting the addition made by the AO on account of disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- u/s. 40(a)(ii). 2. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of claim of deduction/s. 80IA being profit from power generating unit of Rs. 86,04,245/-. 3. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition of Rs. 48,18,503/- made by the AO on account of disallowance of claim of deduction u/s. 80JJA. 4. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of interest of income tax refund of Rs. 15,32,971/-. 5. The Hon’ble CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the addition made by the AO on account of disallowance of interest expenses of Rs. 5,68,926/- as per computation enumerated in section 14A r.w.s. 8d. - 3 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 6. It is therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.” 4. Brief facts of the case is that the assessee is a company engaged in the manufacturing of three wheelers (passenger and loading) and its spare parts under the brand name of “Atul Shakti”. The assessee is also engaged in the generation of Electricity with turbine generator at village Soda Mada, Rajasthan and at village Gandhavi, Gujarat. The assessee filed its original return of income on 18.09.2012 showing a total income of Rs. 25,28,59,330/-. Thereafter, on 30.03.2014 the assessee filed a revised return of income and claimed deduction of cess paid, deduction of unpaid leave salary, deduction under Section 80IA for windmill, deduction under Section 80JJA and declared the total income of Rs. 23,46,49,520/-. The assessment under Section 143(3) was completed on 23.03.2015, wherein the total income of the assessee was assessed at Rs. 25,46,25,110/- wherein the deduction claimed by the assessee in the Revised return are denied by the Ld. AO. 5. Aggrieved against the same, the assessee filed an appeal before the Ld. CIT(A)-1, Rajkot. Now, we will address the ground wise issue raised by the Revenue. 6. Ground No.1:- Ground No. 1 related to disallowance of education and secondary and higher secondary cess of Rs. 21,25,000/- under Sectio 40(a)(ii) claimed by the assessee. - 4 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 7. The Ld. D.R. appearing for the Revenue has fairly conceded that this issue is being squarely covered by CBDT Circular No. 91/58/66 – ITJ(19) dated May 18, 1967 operative w.e.f. 1962-63 wherein it is categorically held that “when the matter came up before the Select Committee, it was decided to omit the word “cess” from the clause. The effect of the omission of the word “cess” is that only taxes paid are to be disallowed in the assessments for the years 1962-63 onwards”. Following the above submission of the Ld. D.R. Ground No. 1 is hereby dismissed. 8. Ground No. 2:- Ground No. 2 raised by the Revenue is that disallowance of claim of deduction under Section 80IA being profit from power generating unit of Rs. 86,04,245/-. 9. This claim was rejected by the Ld. AO on the ground that 80IA claim was not been made in the original return filed by the assessee, but only in the revised return filed by the assessee, therefore, invoking Section 80AC of the Act, the AO denied the benefit to the assessee. The Ld. CIT(A) in this impugned order allowed the claim of the assessee is as follows:- “During the year consideration, the appellant has claimed deduction amounting to Rs. 86,04,245/- u/s. 80-IA in the revised return of income with respect to profits and gains derived from sale of electricity generated by the two windmills. Copy of Audit Report in form 10CCB, balance sheet & profit and loss account of the windmill undertakings along with working of deduction claimed u/s 80IA was furnished before the Assessing Officer and also before me during appellate proceedings in the paper book. Regarding, the first reason provided by the AO that, the windmill undertaking of the appellant is not a separate undertaking from the automobile division of the appellant and the second reason that no approval from state government authorities have been taken, it is pertinent to note that based on the same set of facts the AO has accepted the claim of the appellant u/s. 80-IA for subsequent assessment year i.e. A.Y. 2013-14 and has - 5 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 not raised any question on independence of the windmill undertaking from automobile division and approval from state government authorities. Copy of Assessment order for AY 2013-14 is provided by appellant at page no. 247-256 of the paper book and I have gone through the same. On same set of facts deduction claimed u/s 80IA is not disputed. Moreover, for windmill located in Rajasthan the power purchase agreement submitted before me on page no.207-222 of the paper book clearly states the facts regarding permission obtained from Rajasthan Renewable Energy Corp. Ltd. and for windmill located in Gujarat, the appellant has specifically submitted copy of permission letter from GEDA dated 17.11.2005 for setting up of wind farm on page no.223-224 of the paper book. The aforesaid letters were also submitted before the AO vide submission no. 12 dated 05.03.2015. Hence, based on facts these reasons of the AO for making disallowance are not tenable and further, the amount of deduction claimed is hot in dispute. The third reason provided by the AO for disallowance is that deduction u/s. 80-IA was claimed in revised return of income filed u/s. 139(5) of the Act and not in the original Return of income u/s. 139(1) and this is not in tune with provisions of section 80AC and section 80A (5) of the Act. Regarding this the assessee has placed reliance on decision of Ahmedabad Tribunal in the case of Parmeshwar Cold Storage (P.) Ltd vs. ACIT 16 taxmann.com 88. wherein it has been held that Sec 80AC does not require that the claim should be made only through the original return in time, it only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim, whereas Mumbai Tribunal in the case DCIT vs. Kamdhenu Builders and Developers (ITA. 7010/Mum/2010) dated 27.01.2016 has held that Section 80A(5) only requires filing of return, nowhere it suggests that claim should be made in the original return and not by way of revised return. When the original return of income has been filed well within the due date, the revised return filed thereafter also within the time permitted and before the completion of assessment proceedings, is a valid return of income to be considered by the AO. Also, Chennai tribunal in the case of ACIT V M/s. Precot Meridian Limited (ITA No. 1214/Mds/2012) dated 29.04.2013 has held that revised return filed is a valid return as per the provisions section 139(5), as the original return was filed under section 139(1) within due date prescribed and the assessee complied with the provisions of section 80AC of the Act by filing its original return on 29.9.2008 which is within the due date specified under section 139(1) of the Act. Hence, following the ratio laid down by various courts deduction claimed u/s 80IA through revised return of income u/s 139(5) provided original return is filed within time prescribed u/s 139(1) is accepted. Hence, in this case the original return was filed within due date u/s 139(1) and claim was made in revised return within time limit u/s 139(5), further the claim of the assesseedoes not suffer from any infirmity as provided u/s 80 IA, therefore claim of appellant u/s 80 IA of Rs. 86, 04,245/- is allowed. Ground no. 3 of the appeal is allowed.” 10. The Ld. D.R. appearing for the Revenue supported the order passed by the Ld. AO and pleaded that the assessee has not made the - 6 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 claim of 80IA in the original return of income, but only in the revised return of income and therefore, the assessee is not eligible for the said claim. 11. Per contra, the Ld. A.R. appearing for the assessee has brought to our notice that the Coordinate Bench judgment of the Tribunal in the case of Parameshwar Cold Storage Pvt. Ltd. vs. ACIT, reported in (2011) 16 taxmann.com 88 (Ahd.), where it has been held as follows: “8. We have heard the rival submissions and perused material on record. The undisputed facts are that the assessee has filed a return of income on December 27, 2006 which is within the time as the Central Board of Direct Taxes had extended the time for filing of return up to December 31, 2006, as per the circular referred to above. Even this, is so, the revised return filed by the assessee on December 15, 2008 could not be stated to be within the time allowed under section 139(5). The revised return is to be filed within one year of end of the relevant assessment year, i.e., revised return should be filed by March 31, 2008, therefore, it cannot be stated that the claim has been made through a valid return. Further the provisions of section 80AC for the sake of convenience is reproduced below : "80AC. Deduction not to be allowed unless return furnished. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80- IAB or section 80-IB or section 80-IC, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139." 9. This section does not require that the claim under section 80-IBshould be made only through the original return in time. It only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim. In other words, it is not a requirement to make the claim in the original return itself, which is to be filed within the time. We may further explain that for claiming deduction under section 80-IB, the only condition is that the original return should be filed in time, but the claim need not necessarily be made in the original return, it can be made subsequent thereto also. In Goetze (India) Ltd.'s case (supra), the hon'ble Supreme Court has only considered for claiming deduction before the Assessing Officer, such claim should be made only through the return. But this condition would not be applicable before the appellate - 7 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 authorities. This decision of the Supreme Court was interpreted by the Delhi High Court in Jai Parabolic Springs Ltd.'s case (supra) as under (page 46): "In Goetze (India) Ltd. [2006] 284 ITR 323 (SC) wherein deduction claimed by way of a letter before the Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of the assessing authority to entertain claim for deduction otherwise than by a revised return, and did not impinge on the power of the Tribunal." 10. Accordingly following the above decision, we hold that the claim of deduction under section 80-IB can be made by the assessee before the appellate authorities. Since grounds relating to the deduction under section 80-IB were made before the appellate authorities, irrespective of whether it was claimed by the assessee before the Assessing Officer or not, or whether it was claimed through original return or revised return, the allowability of claim has to be adjudicated on the merits. Since the learned Commissioner of Income-tax (Appeals) has not decided the issue on the merits, we restore the issue claim of deduction under section 80-IB before him to decide the same on the merits.” 12. We do not find any infirmity in the order passed by the Ld. CIT(A). In fact, the Ld. CIT(A) has observed that the claim of deduction under Section 80IA was allowed by the AO for the subsequent A.Y. 2013-14 and copy of the said assessment order was placed before the Ld. CIT(A), wherein the AO has not disputed the deduction of claim under Section 80IA of the Act. Even assuming the major claim has been made only during the revised return of income that issue is also answered in favour of the assessee by the Coordinate Bench of this Tribunal in the case of Parameshwar Cold Storage Pvt. Ltd. (cited supra). In the above circumstances we have no hesitation in confirming the order passed by the Ld. CIT(A) and the ground raised by the Revenue is hereby rejected. - 8 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 13. Ground No.3:- Ground No. 3 raised by the Revenue relates to deleting the addition of Rs. 48,18,503/- made by the AO on account of disallowance of claim of deduction under Section 80JJA here also the AO hold that the claim of deduction under Section 80JJA was not made in the original return of income, but only in the revised return of income, therefore, denying the benefit of the deduction under 80JJA. The Ld. CIT(A) allowed the deduction as follows: “Appellant being a manufacturing concern is entitled for deduction @ 30% of additional wages paid to new regular workmen employed in the factory for three assessment year including assessment year relevant to previous year in which such employment is provided and deduction u/s, 80JJA of the Act amounting to Rs.48,18,503/- was claimed in the revised return of income filed u/s 139(5). It is pertinent to note that the AO has not disputed the genuineness of claim of deduction made by the appellant, his only reason for disallowance of was that the said deduction was claimed in revised return of income filled by the appellant and not in the original return of income filed u/s. 139(1) of the Act and hence, he was of the view that as condition stipulated u/s. 80A(5) of the Act is not fulfilled the claim is not allowable. It is important here to note the provision of section 80A(5) of the Act which states that "Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C,—Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder”. The wordings of section 80A(5) clearly mentions that claim should be made in return of income. The word return of income includes return of income filed u/s. 139 of the Act. Return of Income includes revised return of income filed u/s. 139(5) of the Act. Nowhere in section 80A (5) it has been mentioned that claim shall be allowed only it has been claimed in original return of income furnished u/s 139(1) of the Act. All the decisions cited before me for claim of deduction u/s 80 IA made in ground no 3 on claim of profit on windmill also squarely applies here. Hence, return of income u/s. 80A(5) also includes revised return of income filled u/s. 139(5) of the Act. Therefore, disallowance of deduction u/s. 80JJA of Rs. 48,18,503.30/- on account of failure to make claim of deduction in original return of income is hereby deleted. Hence, Ground No. 4 of the appeal is allowed.” 14. The Ld. D.R. again supported the order of the AO and relying upon Section 80A(C). The assessee failed claim the deduction in the - 9 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 original return of income filed under Section 139(1) and the same is not allowable. 15. Per contra, the Ld. A.R. appearing for the assessee supported the order of the CIT(A) and also submitted that the Revised return were been filed within the prescribed time limit and also before completion of the regular assessment. Therefore, the assessee is eligible for deduction under 80JJA. We do not find any infirmity in the order passed by the Ld. CIT(A) and this issues also like the 80IA claim made by the assessee in the revised return, which will be squarely applicable to this deduction made under Section 80JJA. Thus, we reject the ground raised by the Revenue and hence, dismissed. 16. Ground No.4:- This ground raised by the Revenue is that the CIT(A) erred in deleting the addition made by the AO on account of interest income tax refund of Rs. 15,32,971/-. 17. The AO hold that the assessee received interest of Rs. 15,32,971/- during the Financial Year, however, the same was not offered as income by the assessee. Therefore, the same is added to the total income of the assessee. Whereas the assessee submitted that it has not received any interest from the Income Tax Department, on verification of Form 26AS in the column of interest, no amount is shown in that column. In the absence of receipt of any interest, the same is not offered by the assessee in the return of income and also stated that appeals are pending at higher forums and none of the assessments have attained finality. Therefore, the AO is not correct in - 10 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 adding Rs. 15,32,971/- as such interest is not received by the assessee. The Ld. CIT(A) after full consideration of the facts given the following direction: “Therefore, while upholding in principle that the amount is to be taxed in the year of receipt of refund, Therefore AO is further directed to – 1.1. To provide the details of interest received by the assessee by providing the copies of refund voucher with clear working of interest received "by the assessee 1.2. To examine whether such interest has been withdrawn or not subsequently 1.3. To provide the copies of ITS data system from which refund has been extracted by the ld. Ao 1.4. To examine whether assessee was charged /entitled for any interest under the same provisions after an order under section 143(3) was passed and if so modify the order to the extent assessee's quantum of interest to be brought to tax. 1.5. In case the entire interest granted was withdrawn by any order subsequently, the relief to the extent has to be provided to assessee. With these directions, the ground no. 5 of appeal is partly allowed.” 18. The Ld. D.R. appearing for the Revenue fairly accepted that the CIT(A) has not deleted the interest amount, however, directions are being given to verify the refund status of the assessee. We do not find any infirmity in the direction given by the Ld. CIT(A). Thus, the ground no. 4 raised by the Revenue is hereby dismissed. 19. Ground No.5:- Ground No. 5 raised by the Revenue is disallowance of interest expenses of Rs. 5,68,926/- as per computation under Section 14A r.w.r. 8D of the Act. - 11 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 20. During the Financial Year 2011-12 the assessee has earned tax free income of Rs. 55,32,792/- being dividend income from investment in Mutual Funds. The assessee on its own made a disallowance of Rs. 3,35,877/- being expenditure incurred to earn exempt income. Though, there were no expenditure incurred to earn exempt income. The A.O. invoking Rule 8D determined the disallowance as Rs. 5,68,926/-. 21. On appeal before the Ld. CIT(A), the CIT(A) confined the disallowance to Rs. 3,35,877/- made by the assessee in its return of income and deleted the balance disallowance as follows: “During the year assessee Company has earned tax free income of Rs.55,32,792/- being dividend income from investment in mutual funds. For the purposes of disallowance u/s 14A the company has made a working as tabulated above in submission and suo-moto disallowed Rs.3,35,877/- being expenditure incurred to earn exempt income. Appellant has stated that no expenditure was incurred to earn exempt income and further, with respect to interest cost incurred of Rs.54,15,347/- the appellant stated that these interest cost are incurred for business purpose or and they do not have any direct nexus with earning of exempt income. Rule 8D lays down method for determining amount of expenditure in relation to income not includible total income Rule 8D(2)(i) stipulates that any amount of expenditure directly relating to exempt income should be disallowed whereas Rule8D(2)(ii) broadens the scopes and disallows proportion of interest expenditure incurred which is not directly attributable to any particular income and receipts. As far as Rule 8D(2)(i) is concerned on perusal statement of profit and loss account of the company along with its notes for F.Y. 2011-12 submitted before Id, AO on page no.80 and 89-90 of paper book respectively no such expenditure has been stated by Id. AO which can be said to have been incurred solely towards earning dividend income and also the A.O. has not doubted the said fact. However, where interest cost stipulated in Rule 8D(2)(ii) is concerned it is important to note that out of total interest cost incurred of Rs.54,15,347/- the appellant has considered interest cost of Rs. 14,43,019/- while computing suo-moto disallowance u/s. 14A. However, the A.O brought remaining interest cost Rs.39,72,329/- also in the net of Rule 8D(2)(ii) and re-computed the disallowance. The interest cost of Rs.39,72,329/- includes Rs.38,43,753/-towards interest on term loan and Rs. 1,28,575/- toward interest on statutory dues. With respect to inclusion of the above interest cost of Rs.39,72,329/- the AR of the appellant stated that 'Interest cost incurred towards statutory liabilities such as VAT, Service Tax, TDS and - 12 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 excise can by no stretch of imagination could have said to be incurred for earning exempt income and as far as interest on IDBI term loan is concerned the said loan was availed for business purpose and it is fully re-paid during the year and there is not outstanding loan as on 31.03.2012. Further the interest free fund available with the assessee in the form of share capital and free reserves are also very huge compared to the amount invested. Therefore on this count also no disallowance .on account of interest can be made, I am in agreement of the contention of the appellant that interest cost incurred on term loan used for business purpose and interest cost incurred on late payment of statutory dues is directly attributable to the activity of earning of taxable income. I am of the view that under rule 8D(2)(ii) interest cost to the extent attributable to earn tax free income only can be considered and -taxable income is not to be considered. This view has been upheld in the decision of Hon'ble Delhi High court in the decision of Pr.CIT v. Bharti Overseas Pvt. Ltd.(Delhi)(HC) (ITA 802/2015). wherein vide para 19 of the said decision it was held that "What the ITAT has done in the present case instead is to follow its earlier decision in Champion Commercial (supra) which in turn followed the decision of the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd, (supra). The ITAT did-not on its own read down rule 8D (2) (ii). Rather it went by the stand taken by the Revenue before the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. (supra) in countering the challenge to the constitutional validity of Rule 8 D (2). The stand of the Revenue was that variable A in the formula in Rule 8D (2) (ii) would exclude both interest attributable tax exempt income as well as taxable income.” Hence, interest cost of Rs. 39,72,329/- is not be considered for the purpose of Rule 8D(2)(ii). Appellant has also argued that no direct nexus was proved by A.O that borrowed funds are utilised for making investment No. evidence was place by the AO on record so as to prove that proceeds of term loan has been utilised to make investment in mutual funds. Hence, in absence of any direct nexus it cannot be said that interest paid on such term loan should be added to interest cost stipulated in Rule 8D(2)(ii). Therefore, view upheld by Hon'ble Guj. HC in case of CIT v. Suzlon Energy Ltd. 33 taxmann.com 151 (Guj) that where the taxpayer has owned interest-free funds and there was no direct nexus between interest bearing borrowed funds and investment, no disallowance of interest expenditure could be made under Section 14A of the Act is most respectfully It is also argued by appellant that no disallowance should be made when interest free own funds exceeds the amount of investment and when Shareholders' funds exceed the amount of investment made then it should be presumed that investment is made from interest free Shareholder's fund. For this appellant has placed, reliance on various judicial precedents laid down by Jurisdictional Gujarat High Court. From the perusal of Balance Sheet of the appellant Company it cannot be doubted that Interest free Shareholder's Fund of the Company is far more than the amount of investment in Mutual Funds. Therefore, most respectfully following the decision of Jurisdictional Hon'ble Gujarat High Court in case of CIT V. UTI Bank Ltd. [2013]32 taxmann.com 370, CIT v. Torrent Power Ltd. [2014] 363 TTR 474 and CIT v. Hitachi Home & Life Solutions (I.) Ltd. [2014] 221 Taxmann 109 I am of the view that no disallowance is warranted in the present scenario however, the - 13 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 appellant has suo-moto disallowed a sum of Rs. 3,35,877/- and this does not call for any interference and hence the disallowance made by the appellant is sustained. Appellant has also contended that no satisfaction is recorded by A.O. to reject the calculation of disallowance worked out by the appellant. Invoking Rule 8D to compute disallowance u/s 14A is neither automatic nor triggered merely because assessee has earned an exempt income. Hence, the assessing officer should record a satisfaction that the expenditure incurred in relation to non- taxable income as claimed is incorrect. The satisfaction should be demonstrated 'having regard to the accounts' of the assessee. This is the prescription of section 14A (2). In other words section 14A (2) does not enable the assessing officer to apply Rule 8D automatically. From order of the AO is evident that the AO has nowhere recorded his satisfaction as to why disallowance made by the appellant is not correct and has proceeded to rework such disallowance. Recording of such satisfaction is mandatory and it has been upheld by various High Courts that in absence of such satisfaction recorded by AO the disallowance made by the AO is bad in law. Therefore, most respectfully following the recent the decision of Delhi High Court in the case of CIT v. Taikisha Engineering India Ltd. [2015] 54 taxmann.com 109, I am of the view, that AO has erred in invoking Rule 8D and re-computing disallowance u/s 14A. Therefore, the disallowance re-computed by the AO of Rs. 5,68,926/- is deleted and is restricted to the suo-moto disallowance of Rs. 3,35,877/- made by the appellant in its Return of Income. Hence, ground no. 6 of the appeal is allowed.” 22. We do not labour our self in adjudicating the issue, since the same has been settled by Hon’ble Supreme Court of India in the case of Maxop Investment Ltd. vs. CIT, reported in 402 ITR 640(SC) and PCIT vs. State Bank of Patiala, reported in (2018) 99 taxmann.com 286 (SC). This ground raised by the Revenue is hereby dismissed. 23. In the combined result, the appeals preferred by the assessee and Revenue are dismissed. Order pronounced in the Court on 23 rd May, 2022 at Ahmedabad. Sd/- Sd/- (WASEEM AHMED) ACCOUNTANT MEMBER (T.R. SENTHIL KUMAR) JUDICIAL MEMBER Ahmedabad, dated 23/05/2022 Tanmay TRUE COPY - 14 - ITA Nos.214&251/Rjt/2016 Atul Auto Ltd. vs. DCIT Asst.Year – 2012-13 आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त)अपील (/ The CIT(A)- 5. वभागीय त न ध ,आयकर अपील(य अ धकरण,राजोकट/DR,ITAT, Ahmedabad, 6. गाड. फाईल /Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation : 19-05-2022 2. Date on which the typed draft is placed before the Dictating Member. : 20.05.2022 3. Date on which the approved draft comes to the Sr.P.S./P.S : .05.2022 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 7. Date on which the file goes to the Bench Clerk. : 23.05.2022 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order :