ASSOCIATED CONTAINER LINE PVT LTD., Mumbai V. DCIT 5(1)(1), Mumbai

ITA 4691/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7260 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 11-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Assessee Lawyers: ATUL DESHPANDE
• Keywords: Earning of tax free income; Rule 8D; Set aside; Liquidation; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4691/MUM/2019 ASSESSMENT YEAR: 2014-15 ASSOCIATED CONTAINER LINE PVT. LTD, 901, PENINSULA TOWER, PENINSULA CORPORATE PARK, GANPATRAO KADAM MARG, LOWER PAREL (WEST), MUMBAI-400013. VS. DY. COMMISSIONER OF INCOME TAX-5(1)(1), MUMBAI. PAN NO. AAACA 9239 L APPELLANT RESPONDENT ASSESSEE BY : MR.ATUL DESHPANDE, AR REVENUE BY : MR. BRAJENDRA KUMAR, DR DATE OF HEARING : 07/01/2021 DATE OF PRONOUNCEMENT : 27/01/2021 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2014-15. THE APPEAL IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : 1. THE DCIT 5(1)(1) HAS ERRED IN MAKING DISALLOWANCE OF RS.7,58,612/- U/S 14A OF INCOME TAX ACT, 1961 READ WITH RULE 8D OF IN COME TAX RULES 1962. 2 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. REASONS GIVEN BY THE ASSESSING OFFICER WHILE MAKI NG ABOVE ADDITION ARE INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORDS. 2. RULE 8D CAN BE APPLIED ONLY IN CASE ACTUAL EXPENSES ARE NOT AVAILABLE. IN PRESENT CASE ACTUAL EXPENSES INCURRED ARE AVAILABLE , HENCE THE FORMULA GIVEN IN RULE 8D CANNOT BE APPLIED ONLY BECAUSE IT RESULT S IN HIGHER AMOUNT OF DISALLOWANCE. 3. THE DCIT 5(1)(1) HAS EARNED IN MAKING DISALLOWANCE OF RS.12,436/- U/S 14A OF INCOME TAX ACT 1961, READ WITH RULE 8D(2)(I) THO UGH THE SAME HAS BEEN ALREADY DISALLOWED WHILE COMPUTING THE TAXABLE INCO ME. 4. THE CIT(A)-10 MUMBAI ERRED IN PARTIALLY UPHOLDING T HE ORDER PASSED BY DCIT 5(1)(1). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2014-15 DECLARI NG TOTAL INCOME OF RS. 3,38,66,890/-. THE ASSESSEE IS A PRIVATE LIMITED CO MPANY ENGAGED IN THE BUSINESS OF INTERNATIONAL FREIGHT FORWARDING. IT EA RNED THE FOLLOWING EXEMPT INCOME DURING THE IMPUGNED ASSESSMENT YEAR. 1. INCOME FROM TAX FREE BONDS RS. 21, 22, 601/ - 2. DIVIDEND FROM EQUITY SHARES RS. 3,43,607/ - 3. DIVIDEND FROM MUTUAL FUNDS RS. 4,39,913/ - TOTAL RS. 29,06,121/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (AO) OBSERVED THAT THE APPELLANT HAS SUO MOTU MADE A DISALLOWANCE OF RS. 12,436/- ON ACCOUNT OF PAYMENT OF DEMAT CHARGES , WHICH IS C OVERED BY RULE 8D (2) (I) OF THE INCOME TAX RULES, 1962 (THE RULES). THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A R.W.R. 8D SH OULD NOT BE MADE. IN 3 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. RESPONSE TO IT, THE ASSESSEE FILED AN EXPLANATION VIDE LETTER DATED 25.11.2016 STATING THAT ALL THE INVESTMENTS ARE MADE ON INTERN AL ACCRUALS AND NO BORROWINGS WERE MADE FOR MAKING IN INVESTMENTS ; FU RTHER NO ADMINISTRATIVE EXPENSES WERE INCURRED FOR EARNING THE DIVIDEND INC OME. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE APP ELLANT AND FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN GODREJ BOYCE & MFG. CO. LTD. VS. ACIT (2010) 328 ITR 81 (BOM), COMPUTED THE DISALLOWANCE UNDER RULE 8D (2)(III) AT RS. 7,58,612/-. THUS, THE AO MADE AN AD DITION OF RS. 7,58,612/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE CIT (A). WE FIND THAT VIDE ORDER DATED 02.04.2019, THE LD. CIT (A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE WITH THE F OLLOWING DIRECTIONS:- 6.3.12 HOWEVER, I FIND MERIT IN THE CLAIM OF THE A PPELLANT THAT THE INVESTMENT OF RS. 75,00,000/- MADE IN IDFC SUPER SA VER INCOME FUND-GROWTH PLAN DOES NOT EARN TAX FREE INCOME AS THE PROCEEDS EARNED ON LIQUIDATION ARE SUBJECT TO TAX AS LONG TERM CAPITAL GAIN, HENCE, ON THIS INVESTMENT, THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES IS UNCALLED FOR. UNDER THESE OPTIONS NO DIVIDEND IS DECLARED, THE IN COME ATTRIBUTABLE TO THE UNITS UNDER THESE OPTIONS REMAIN INVESTED IN FUNDS. THE GROWTH FUNDS GENERATE INCOME ONLY IN THE FORM OF CAPITAL GAINS/LOSSES THA T ACCRUE ON SALE/REDEMPTION OF UNITS OF SUCH FUNDS. THEREFORE, THE AO IS DIRECT ED REWORK THE AVERAGE VALUE OF INVESTMENT FOR THE PURPOSE OF COMPUTING THE DISALLO WANCES PER RULE 8D(2)(III) AFTER EXCLUDING THE INVESTMENT IN IDFC SUPER SAVER INCOME FUND-GROWTH PLAN. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REFE RS TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 (ITA NO. 5079/MUM/2012) AND AY 2010-11 (ITA NO. 5758/MUM/2015) AND AY 2011- 12 (ITA NO. 5759/MUM/2015). 4 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. EXPLAINING THAT THE DISALLOWANCE OF RS. 7,71,048/- MADE BY THE AO U/S 14A R.W.R. 8D IS INCORRECT, THE LD. COUNSEL ELABORA TES THAT THE AO HAS MADE THE DISALLOWANCE AS MERE ROUTINE , WITHOUT GOING INTO T HE MERITS OF THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AS TO WHY THE DISA LLOWANCE IS NOT APPLICABLE ; INVESTMENTS MADE BY THE COMPANY ARE LONG TERM IN NA TURE; THE COMPANY HAS NOT BORROWED ANY FUNDS FOR MAKING SUCH INVESTMENTS; EXPENSES INCURRED IN RESPECT OF EARNING OF EXEMPT INCOME HAVE BEEN ALREA DY DISALLOWED BY THE COMPANY, WHILE FILING ITS RETURN OF INCOME; SUCH DI SALLOWANCE RESULTS IN DENIAL OF GENUINE EXPENSES INCURRED IN RESPECT OF EARNING TAXABLE INCOME. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) SUBMITS THAT THE LD. CIT (A) HAS RIGHTLY FOLLOWED THE DECIS ION IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AND PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE BY GIVING DIRECTION TO THE AO TO REWORK THE AVERAGE OF INVEST MENT FOR THE PURPOSE OF COMPUTING THE DISALLOWANCE AS PER RULE 8D (2) (III) AFTER EXCLUDING THE INVESTMENT IN IDFC SUPER SAVER INCOME FUNDS GROWT H PLAN. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE REASONS FOR OUR DECISION A RE GIVEN BELOW:- IN ASSESSEES OWN CASE FOR AY 2005-06, THE TRIBUNA L HAS HELD THAT: 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. W E HAVE ALSO PERUSED THE PAPER BOOK FILED BY THE ASSESSEE AND WE NOTICE THAT THE ASSESSEE HAS INCURRED AGGREGATE EXPENSES OF RS. 1.17 CRORES. WE FURTHER N OTICE THAT THE ASSESSEE HAS MADE FRESH INVESTMENTS IN 9 SCHEMES OF MUTUAL FUNDS DURING THE YEAR UNDER CONSIDERATION AND IT HAS CLOSED INVESTMENTS MADE IN SIX SCHEMES, WHICH WERE STANDING AT THE BEGINNING OF THE YEAR. THE ASSESSEE HAS ALSO RECEIVED DIVIDEND 5 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. INCOME TO THE TUNE OF RS. 15.29 LAKHS. THUS WE NOTI CE THAT THE ASSESSEE HAS INDULGED IN QUITE NUMBER OF TRANSACTIONS DURING THE YEAR AND HENCE, WE SEE NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT IT DID NOT INCUR ANY EXPENSES FOR EARNING THE DIVIDEND INCOME. 6. CONSIDERING THE NUMBER OF TRANSACTIONS, QUANTUM OF AGGREGATE EXPENDITURE AS WELL AS FACT THAT THE ASSESSEE HAS R ECEIVED DIVIDEND INCOME OF RS. 15.29 LAKHS, WE ARE OF THE VIEW THAT A REASONABLE D ISALLOWANCE SHOULD BE MADE AS REQUIRED UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. HOWEVER, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS. 50,000/- MADE BY THE AO IS ON THE HIGHER SIDE. HENCE, ON CONSPECTUS OF THE MATTER, WE HOLD T HAT A DISALLOWANCE OF RS. 25,000/- WOULD BE REASONABLE IN THE FACTS AND CIRCU MSTANCES OF THE CASE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO RS. 25000/-, AS REFERRED ABOVE. 7.1 IN ASSESSEES OWN CASE FOR AY 2010-11, THE TRIB UNAL HAS HELD THAT: 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FO R BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDE RATION EARNED A DIVIDEND INCOME OF RS.11,67,933/- ON EXEMPT INCOME YIELDING INVESTMENTS OF RS.7,12,52,078/-. THE ASSESSEE HAD NOT ATTRIBUTED A NY PART OF THE EXPENSES AS HAVING BEEN INCURRED FOR EARNING OF THE AFORESAID E XEMPT INCOME. ON A QUERY BY THE A.O AS TO WHY THE DISALLOWANCE UNDER SEC.14A MA Y NOT BE MADE IN RESPECT OF THE EXEMPT DIVIDEND INCOME, IT WAS SUBMITTED BY THE ASSESSEE THAT AS IT HAD NOT INCURRED ANY EXPENSE OTHER THAN DEMAT CHARGES, HENC E NO DISALLOWANCE UNDER SEC.14A WAS CALLED FOR IN ITS HANDS. WE FIND THAT T HE A.O HAD DISLODGED THE CLAIM OF THE ASSESSEE THAT NO EXPENSE WAS ATTRIBUTABLE TO EARNING OF THE EXEMPT DIVIDEND INCOME, MERELY ON THE BASIS OF AN OBSERVAT ION THAT IT WAS BEYOND COMPREHENSION THAT NO PART OF THE EXPENSES AGGREGAT ING TO RS.2,50,32,263/- 6 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. DEBITED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCO UNT COULD BE RELATED TO EARNING OF THE EXEMPT DIVIDEND INCOME BY THE ASSESSEE. 7. WE HAVE DELIBERATED AT LENGTH ON THE ORDERS OF T HE LOWER AUTHORITIES, AND ARE OF THE CONSIDERED VIEW THAT THE A.O WHILE DISLODGIN G THE CLAIM OF THE ASSESSEE THAT AS NO PART OF THE EXPENSES DEBITED IN THE PROF IT AND LOSS ACCOUNT WAS RELATABLE TO EARNING OF THE EXEMPT DIVIDEND INCOME, THUS NO DISALLOWANCE UNDER SEC. 14A WAS CALLED FOR IN ITS HANDS, HAD FAILED TO RECORD HIS SATISFACTION AS REGARDS THE CORRECTNESS OF SUCH CLAIM, HAVING REGAR D TO THE ACCOUNTS OF THE ASSESSEE. RATHER, WE FIND THAT THE A.O HAD DISLODGE D THE CLAIM OF THE ASSESSEE THAT NO DISALLOWANCE UNDER SEC. 14A WAS LIABLE TO B E MADE IN ITS HANDS BY HOLDING A CONVICTION THAT IT WAS BEYOND COMPREHENSI ON THAT NO EXPENSE INCURRED BY THE ASSESSEE COULD BE RELATED TO EARNIN G OF EXEMPT DIVIDEND INCOME. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (2017) 394 ITR 449 (SC), IT WAS OBLIGAT ORY ON THE PART OF THE A.O TO HAVE RECORDED HIS SATISFACTION, HAVING REGARD TO TH E ACCOUNTS OF THE ASSESSEE, AS TO WHY THE LATTER CLAIM THAT NO EXPENDITURE WAS ATT RIBUTABLE TO EARNING OF THE EXEMPT DIVIDEND INCOME WAS NOT TO BE ACCEPTED. THE HONBLE SUPREME COURT WHILE DELIBERATING ON THE SAID ISSUE AT LENGTH HAD OBSERVED AS UNDER: 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002-2003. SUBSECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES MERELY PRESCRIBE A FORMULA FOR DETERMINATION OF EXPENDITURE INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM O F THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE F ORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OF FICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSI NG OFFICER THAT HAVING REGARD TO 7 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRE CTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERM INATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. WE FIND THAT IN THE CASE BEFORE US, THE CLAIM OF TH E ASSESSEE THAT NO DISALLOWANCE UNDER SEC.14A WAS CALLED FOR IN ITS CASE HAD BEEN D ISLODGED BY THE A.O, NOT ON THE GROUND THAT HAVING REGARD TO THE ACCOUNTS OF TH E ASSESSEE, AS PLACED BEFORE HIM, IT WAS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EX PENDITURE WAS INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME, BUT RATHER T HE SAME WAS NOT ACCEPTED FOR THE REASON THAT AS PER THE A.O IT WAS BEYOND CO MPREHENSION THAT NO EXPENSE DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUN T COULD BE RELATED TO EARNING OF THE EXEMPT DIVIDEND INCOME BY THE ASSESSEE. WE H AVE DELIBERATED ON THE AFORESAID OBSERVATIONS OF THE A.O AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAME. WE ARE OF THE CONSIDERED VIE W THAT AS THE A.O WHILE DISLODGING THE CLAIM OF THE ASSESSEE, THAT NO EXPEN SE WAS ATTRIBUTABLE TO EARNING OF THE EXEMPT DIVIDEND INCOME HAD FAILED TO COMPLY WITH THE STATUTORY REQUIREMENT OF ARRIVING AT A SATISFACTION HAVING RE GARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, THAT IT WAS NOT POS SIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE SAID CLAIM OF THE ASSESSEE, THEREFORE, IT CAN SAFELY BE CONCLUDED THAT THE MAND ATE OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (2017) 394 ITR449 (SC) HAD NOT BEEN SAT ISFIED BY HIM. WE THUS, HOLDING A CONVICTION THAT AS THE ORDER PASSED BY TH E A.O IN THE CASE BEFORE US IS NOT IN CONFORMITY WITH THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY (SUPRA), HENCE THE DISALLOWANCE OF RS.2,29,151/- MADE BY THE A.O CANNOT BE SUSTAINED A ND IS LIABLE TO BE VACATED. 8 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. WE THUS, SET ASIDE THE ORDER OF THE CIT(A) AND DELE TE THE DISALLOWANCE OF RS.2,29,151/- MADE BY THE A.O UNDER SEC.14A R.W. RU LE 8D. 7.2 IN ASSESSEES OWN CASE FOR AY 2011-12, THE TRIB UNAL HAS HELD THAT:- 13. WE SHALL FIRST ADVERT TO THE DISALLOWANCE OF R S.4,06,350/- MADE BY THE A.O UNDER SEC. 14A R.W. RULE 8D, WHICH THEREAFTER HAD B EEN SUSTAINED BY THE CIT(A). WE HAVE PERUSED THE ORDER OF THE A.O AND FIND THAT HE WHILE DISLODGING THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT WAS ATTRIBUTABLE TO EARNING OF THE EXEMPT DIVIDEND INCO ME OF RS. 18,70,574/-, HAS HOWEVER FAILED TO ARRIVE AT A SATISFACTION HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, THAT IT WAS NOT POS SIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE SAID CLAIM OF THE ASSESSEE. RATHER, WE FIND THAT THE SAID CLAIM OF THE ASSESSEE THAT NO EXPENSE WAS INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME HAD BEEN MOST CASUALLY DISLODGED BY THE A.O, BY OBSERVING THAT THE ASSESSEE OUGHT TO HA VE MADE DISALLOWANCE OF EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NO T OR SHALL NOT FORM PART OF TOTAL INCOME AS REQUIRED UNDER SEC. 14A IN ACCORDAN CE WITH THE PROVISIONS OF RULE 8D. WE THOUGH FIND THAT THE A.O WHILE MAKING T HE DISALLOWANCE HAD MADE A MENTION OF HAVING REFERRED TO THE ACCOUNTS OF THE A SSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION AND THAT HE WAS NOT SATISFIED W ITH THE CORRECTNESS OF THE SAME, BUT HE HAD NOT SAID A WORD AS TO WHY HE WAS U NABLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNE SS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS RELATABLE TO EARNING OF THE EXEMPT DIVIDEND INCOME. WE ARE OF THE CONSIDERED VIEW THAT THE A.O WHILE DISLO DGING THE CLAIM OF THE ASSESSEE THAT NO EXPENSE WAS RELATABLE TO EARNING O F THE EXEMPT DIVIDEND INCOME OUGHT TO HAVE MADE A MENTION OF THE EXPENSES WHICH WERE BOOKED BY THE ASSESSEE IN ITS BOOKS ACCOUNT, AND IN THE BACKD ROP OF THE SAME SHOULD HAVE POINTED OUT THAT THE INCURRING OF THE SAME HAD AN I NEXTRICABLE NEXUS WITH THE EARNING OF THE EXEMPT DIVIDEND INCOME. WE THUS, ARE OF CONSIDERED VIEW THAT AS OBSERVED BY US IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y 2010-11, IN THE YEAR UNDER CONSIDERATION A LSO THE A.O WHILE DISLODGING 9 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. THE CLAIM OF THE ASSESSEE THAT NO DISALLOWANCE WAS CALLED FOR IN ITS HANDS UNDER SEC. 14A, HAD FAILED TO GENERATE THE REQUISITE SATI SFACTION WITH REGARD TO THE CORRECTNESS OF THE SAID CLAIM OF THE ASSESSEE. WE T HUS, ARE OF THE CONSIDERED VIEW THAT AS THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 14A R.W RUE 8D IS NOT AS PER THE MANDATE OF THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY VS. DCIT AND A NR. (2017) 394 ITR 449 (SC), HENCE THE SAME CANNOT BE SUSTAINED AND IS LIA BLE TO BE VACATED. THE ORDER PASSED BY THE CIT(A) IN CONTEXT OF THE ISSUE UNDER CONSIDERATION IS SET ASIDE AND THE DISALLOWANCE UNDER SEC. 14A R.W RULE 8D OF RS.4 ,06,350/- SUSTAINED BY THE CIT(A) IS DELETED. 7.3 IN PARA 4.1 OF THE ASSESSMENT ORDER DATED 13.11 .2016, THE AO HAS NOTED THAT THE ASSESSEE OUGHT TO HAVE MADE DISALLOWANCE O F EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS REQUIRED U/S 14A R.W.R. 8D. FURTHER, THE AO HAS OBS ERVED THAT THE ASSESSEE HAS SUO MOTU DISALLOWED RS. 12,436/- ON ACCOUNT OF PAYMENT OF D EMAT CHARGES, WHICH IS COVERED UNDER RULE 8D (2) (I). THEREAFTER, AS MENTIONED IN PARA 4.2 OF THE ASSESSMENT ORDER, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A R.W.R. 8D SHOULD NOT BE MADE I N ITS CASE. IN RESPONSE TO IT, THE ASSESSEE FILED AN EXPLANATION VIDE LETTER DATED 25.11.2016 STATING THAT ALL THE INVESTMENTS ARE MADE ON INTERNAL ACCRUALS AND N O BORROWINGS WERE MADE FOR MAKING ANY INVESTMENTS; NO ADMINISTRATIVE EXPEN SES WERE INCURRED FOR EARNING OF DIVIDEND. THEREAFTER, THE AO HAS MADE A DISALLOWANCE OF RS. 7,58,612/- UNDER RULE 8D(2)(III). 7.4 FACTS BEING IDENTICAL IN RESPECT OF THE REASONS RECORDED BY THE AO AS MENTIONED AT PARA 7.3 ABOVE WITH THE AYS 2010-11 AN D 2011-12, WE FOLLOW THE ABOVE ORDER OF THE COORDINATE BENCH AND SET ASIDE T HE ORDER OF THE LD. CIT (A). 10 ITA NO. 4691/MUM/2019 ASSOCIATED CONTAINER LINE PVT. LTD. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/01/2021. SD/- SD/- (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 27/01/2021 ALINDRA, P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI