ANSHUL SPECIALITY MOLECULES . P. LTD, MUMBAI V. DCIT CEN CIR 6(3), MUMBAI

ITA 6803/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7822 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Earning of tax free income; Scheme of amalgamation
• Section: 14A; 115JB

Judgement Text

P A G E | 1 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6803/MUM/2016 (ASSESSMENT YEAR: 2012 - 13 ) ANSHUL SPECIALITY MOLECULES PVIVATE LIMITED, 13, ARADHANA INDUSTRIAL DEVELOPMENT CORPORATION, NEAR VIRWANI INDUSTRIAL ESTATE, GOREGAON (EAST), MUMBAI VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 6(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 PAN AABCA4003H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY: SHRI SAISUDHA MULTANI , A.R. RESPONDENT BY: SHRI SATISH CHANDRA RAJORE, D.R DATE OF HEARING: 18 .12.2018 DATE OF PRONOUNCEMENT: 2 6 .12.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 54, MUMBAI DATED 31.08.2016 , WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 30.03.2015. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRE D IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME - TAX ACT, 196 1(THE ACT ) AS PER RULE 8D OF THE INCOME - TAX RU LES AMOUNTING TO RS.42,15,470/ - . 1.2 IN DOING SO, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER THE FOLLOWING RESPECTS: P A G E | 2 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) (A) IN N OT ACCEPTING THE REASONABLE BASIS WORKING NODE BY THE APPELLANT FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT: (B) IN NOT APPRECIATING THE FACT THAT PROVISIONS OF SUB - SECTION (2) OF SECTION 14A OF THE ACT COULD BE INVOKED ONLY IF THE ASSE SSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, WAS 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 ACT: (C) IN NOT APPRE CIATING THE FACT THAT INVESTMENT IN GROUP COMPANIES WERE MADE FOR STRATEGIC PURPOSE AND ARE NOT WITH A VIEW TO EARN EXEMPT INCOME; (D) IN NOT APPRECIATING THE FACT THAT MAJORITY OF THE INVESTMENTS WERE RECEIVED BY THE APPELLANT UNDER A SCHEME OF AMALGAMATION; 1.3 WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING TILE ACTION OF THE ASSESSING OFFICER BY CONSIDERING GROSS AMOUNT OF INTEREST AT RS 1.63.69.647/ - INSTEAD OF NET AMOUN T OF INTEREST AT RS. 1,6 0,29,200/ - WHILE COMPUTING THE AMOUNT OF INTEREST FOR THE PURPOSES OF RULE 8D(2)(II). 1.4 WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT EXCLUDING INVESTMENTS IN COMPANIES WHICH YIELDED DIVIDEND WHEREIN SUCH DIVIDEND HAS SUFFERED TAX UNDER THE PROVISIONS OF SECTION 115 - 0. 1.5 WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE PROVISIONS RULE 8D ARE NOT APPLICABLE FOR COMPUTING THE DISALLOWANCE IN RESPECT OF EXPENDITURE RELATABLE TO EXEMPT INCOME WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115J B. THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD TO ALTER OR AMPLIFY THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICAL S HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2012 - 13 ON 28.09.2012 DECLARING TOTAL INCOME OF RS.1,31,66,377/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC.143(2) OF THE I.T. ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE WAS IN RECEIPT OF DIVIDEND INCOME OF RS.1 , 23 ,43,470/ - WHICH WAS CLAIMED AS EXEMPT. IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAD SUO MOT T O DISALLOWED AN AMOUNT OF RS.441 / - AS HAVING BEEN INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME . FURTHER, IT WAS P A G E | 3 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) OBSERVED BY HIM THAT UNDER A SCHEME OF ARRANGEMENT APPROVED BY THE HONBLE HIGH COURT OF BOMBAY, DATED 14.09.2012 THE ENTIRE INVESTMENT OF THE ASSESSEE WAS TRANSFERRED TO ITS ASSOCIATE COMPANY VIZ. M/S UTKARSH CHEMICALS PVT. LTD. WITH EFFECT FROM 01.01.2012. THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE OF EXPENSES INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME MAY NOT BE COMPUTED AS PER SEC.14A R.W. RULE 8D. THE ASSESSEE VI DE ITS LETTER DATED 20.03.2015 WORKED OUT THE DISALLOWANCE BY APPLYING THE PROVISIONS OF SEC. 14A R.W. RULE 8D , AS PROPOSED BY THE A.O . T HE DISALLOWANCE ON THE BASIS OF THE AFORE SAID WORKING STOOD COMPUTED AT RS.41,39,426/ - . THE A.O OBSERVING THAT THE INTE REST EXPENDITURE IN THE AFORESAID WORKING OF DISALLOWANCE UNDER SEC.14A R.W. RULE 8D WAS WRONGLY ARRIVED AT BY TAKING THE SAME AT RS. 1.60 CRORE AS AGAINST RS.1.63 CRORE, THEREFORE, MODIFIED THE SAME AND WORKED OUT THE DISALLOWANCE UNDER SEC. 14A R.W. RULE 8D AT RS.42,15,911/ - . AFTER ALLOWING THE DEDUCTION OF THE VOLUNTARY DISALLOWANCE OF RS.441/ - THAT WAS OFFERED BY THE ASSESSEE THE A.O MADE A FURTHER ADDITION /DISALLOWANCE OF RS.42,15,470/ - . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A). THE ASSESSEE ASSAIL ED THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 14A R.W. RULE 8D ON MULTIPLE GROUNDS BEFORE THE CIT(A) VIZ. (I) THAT THE A.O HAD FAILED TO RECORD HIS SATISFACTION AS REGARDS THE IN CORRECTNESS THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE OF RS.441/ - THAT WAS SHOWN BY IT FOR EARNING OF THE EXEMPT DIVIDEND INCOME; (II) THAT THE A.O HAD ERRED IN FAILING TO APPRECIATE THAT THE INVESTMENTS MADE BY THE ASSESSEE IN THE SHARES OF THE ASSOCIATE S AND GROUP COMPANIES WERE IN THE N ATURE OF STRATEGIC INVESTMENTS AND NOT WITH AN INTENTION OF EARNING OF EXEMPT DIVIDEND INCOME; (III) THAT THE A.O HAD ERRED IN WORKING OUT THE DISALLOWANCE BY CONSIDERING THE GROSS AMOUNT OF INTEREST AND NOT THE NET AMOUNT OF INTEREST; AND (IV) THAT THE A. O HAD ERRED IN ADDING THE AMOUNT OF DISALLOWANCE WORKED OUT UNDER SEC.14A R.W.R. 8D WHILE COMPUTING THE BOOK PROFIT UNDER SEC. 115JB OF THE I.T. ACT. THE CIT (A) AFTER DELIBERATING ON THE CONTENTION S ADVANCED BY THE ASSESSEE REJECTED THE SAME. THE CONTENT ION ADVANCED BY THE ASSESSEE THAT THE A.O P A G E | 4 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) HAD WITHOUT RECORDING HIS SATISFACTION AS REGARDS THE IN CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE THAT WAS ATTRIBUTED BY IT FOR EARNING OF THE EXEMPT DIVIDEND INCOME WHILE COMPUTING ITS INCOME , HOWEVER, DID NO T FIND FAVOUR WITH THE CIT(A) WHO REJECTED THE SAME . IT WAS OBSERVED BY THE CIT(A) THAT A PERUSAL OF SEC.14A NOWHERE REVEALED THAT IT WAS OBLIGATORY ON THE PART OF THE A.O TO HAVE RECORDED ANY SUCH SATISFACTION IN WRITING. RATHER, IT WAS OBSERVED BY THE CIT(A) THAT THE VERY FACT THAT THE A.O HAD PROCEEDED TO INVOKE THE PROVISIONS OF SUB - SECTION ( 2 ) TO SEC.14A IN ITSELF REVEALED THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE AFORESAID CLAIM MAD E BY THE ASSESSEE. FURTHER, THE CIT(A) WAS OF THE VIEW THAT THE PROVISIONS OF SUB - SECTION (3) OF SEC.14 A SHALL HAVE AN AUTOMATIC APPLICATION WHEN IT WAS CLAIMED BY THE ASSESSEE THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EARNING OF THE EXEMPT D IVIDEND INCOME. ON THE BASIS OF HIS AFORESAID OBSERVATIONS IT WAS CONCLUDED BY THE A.O THAT THE QUESTION OF EXAMINING THE SATISFACTION OF THE A.O AS REGARDS THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE DID NOT ARISE DUE TO THE LEGAL FICTION EMBODIED IN S UB - SECTION (3) OF SEC. 14A OF THE I.T. ACT. APART THEREFROM, THE OTHER CONTENTION S WHICH WERE ADVANCED BY THE ASSESSEE AS REGARDS THE VALIDITY OF THE DISALLOWANCE MADE BY THE A.O UNDER SEC.14A R.W. RULE 8D ALSO DID NOT FIND FAVOUR WITH THE CIT(A) WHO REJEC TED THE SAME. INSOFAR THE CLAIM OF THE ASSESSEE THAT THE DISALLOWANCE MADE UNDER SEC.14A WAS NOT TO BE ADDED TO THE BOOK PROFIT UNDER SEC.115JB OF THE I.T. ACT , THE SAME TOO WAS REJECTED BY THE CIT(A). THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVAT IONS DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT CASE WAS SQUARELY COVERED BY THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL I.E ITAT H BENCH MUMBAI IN THE ASSESSES OWN CASE FOR A.Y. 2011 - 12 VIZ. ANSHUL SPECIALITY MOLECULES LTD. (NOW KNOWN AS ANSHUL SPECIALITY PVT. LTD.) VS. DCIT, CENTRAL CIRCLE - 6(3) (ITA NO. 4436/MUM/2016; DATED 13.06.2018). IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL WHILE P A G E | 5 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) DISPOSING OFF THE APPEAL OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2011 - 12 , AFTER DELIBERATING ON THE FACTS WHICH WERE SIMILARLY PLACED AS AGAINST THOSE F OR THE YEAR UNDER CONSIDERATION HAD VACATED THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 14A R.W. RULE 8D . IT WAS AVERRED BY THE LD. A.R THAT THE A.O WHILE DISLODGING THE CLAIM O F THE ASSESSEE AS REGARDS THE EXPENDITURE THAT WAS INCURRED FOR EARNIN G OF THE EXEMPT DIVIDEND INCOME HAD FAILED TO RECORD HIS SATISFACTION AS REGARDS THE IN CORRECTNESS OF THE SAID CLAIM . IT WAS SUBMITTED BY THE LD. A.R THAT IN THE PRESENT CASE ALSO THE A. O HAD REJECTED THE CLAIM OF THE ASSESSEE THAT AN AMOUNT OF RS.441/ - ONLY WAS ATTRIBUTABLE TOWARDS EARNING OF THE EXEMPT DIVIDEND INCOME WITHOUT RECORDING HIS SATISFACTION AS TO WHY THE SAME WAS NOT TO BE ACCEPTED. THE LD. A.R SUBMITTED THAT THE ASSESSEE DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD ONLY AT THE BEHEST OF THE A.O AS TO WHY THE EXPENSES INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME MAY NOT BE WORKED OUT AS PER SEC.14A R.W.RULE 8D , HAD THEREIN V IDE ITS LETTER DATED 20.03.2015 FURNISH ED THE WORKING OF SUCH DISALLOWANCE AT RS. 41,39,426/ - WITH HIM . APART THEREFROM, THE LD. A.R. ALSO PLACED ON RECORD A C HART AS PER WHICH THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 14A R.W RULE 8D WAS ASSAILED BEFORE US ON MULTIPLE GROUNDS. 6. PER CONT RA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS THE CONTENTION OF THE LD. D.R THAT THE A.O HAD RIGHTLY MADE THE DISALLOWANCE OF RS. 42,15,470/ - UNDER SEC.14A R.W. RULE 8D OF THE EXPENSES T HAT WERE INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECOR D. WE FIND FROM A PERUSAL OF THE ASSESSMENT ORDER THAT THE CLAIM OF THE ASSESSEE THAT AN AMOUNT OF RS.441/ - ONLY WAS ATTRIBUTABLE TOWARDS EARNING OF THE EXEMPT DIVIDEND INCOME WAS NOT ACCEPTED BY THE A.O. IT IS A MATTER OF RECORD THAT T H E A.O HAD REJECTED THE AFORESAID CLAIM OF THE ASSESSEE WITHOUT RECORDING HIS SATISFACTION AS TO WHY THE SAME W AS NOT TO BE ACCEPTED HAVING REGARDS TO THE ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAD ASSAILED BEFORE P A G E | 6 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) THE CIT(A) THE DISLODGING O F ITS CLAIM OF EXPENSE INCURRED FO R EARNING OF THE EXEMPT INCOME DE HORS RECORDING OF ANY SATISFACTION AS REGARDS THE INCORRECTNESS OF SUCH CLAIM ON THE PART OF THE A.O . HOWEVER, THE CIT(A) DID NOT FIND FAVOUR WITH THE CONTENTIONS ADVANCED BY THE ASSESSEE AND NOT FINDING ANY INFIRMITY IN T HE ORDER OF THE A.O, UPHELD THE SAME. RATHER, A PERUSAL OF THE ORDER OF THE CIT(A) REVEALS THAT HE HAD GIVEN A GO BY TO THE STATUTORY REQUIREMENT OF RECORDING OF SATISFACTION BY THE A.O , HOLDING A CONVICTION THAT IT WAS NOT OBLIGATORY ON THE PART OF THE A. O TO HAVE RECORDED THE SAME IN WRITING. AS OBSERVED BY US HEREINABOVE, THE CIT(A) WAS OF THE VIEW THAT THE FACT THAT THE A.O HAD PROCEEDED TO INVOKE THE PROVISIONS OF SUB - SECTION (2) OF SEC.14A IN ITS ELF REVEALED THAT HE WAS NOT SATISFIED WITH THE CORRECTN ESS OF THE CLAIM MADE BY THE ASSESSEE. APART THEREFROM, THE CIT(A) WAS OF THE VIEW THAT AS THE PROVISIONS OF SUB - SECTION ( 3 ) OF SEC.14A SHALL HAVE AN AUTOMATIC APPLICATION WHEN SUCH A CLAIM WAS MADE BY THE ASSESSEE , THEREFORE, THE QUESTION OF EXAMINING THE SATISFACTION OF THE A.O WITH REGARD TO THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE DID NOT ARISE . 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW TAKEN BY THE CIT(A). ADMITTEDLY, THE A.O HAD FAILED TO RECORD HIS SATISFACTION AS REGARDS THE IN CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENSES INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME, HAVING REGARD TO THE ACCOUNTS OF TH E ASSESSEE. APART THEREFROM , THE SAID VIEW TAKEN BY THE A.O WAS APPROVED BY THE CIT(A) , WHO WE FIND HELD A STRONG CONVICTION THAT IT WAS NOT OBLIGATORY AT ALL FOR THE A.O TO HAVE RECORDED HIS SATISFACTION. IN OUR CONSIDERED VIEW THE ISSUE AS TO WHETHER IT IS OBLIGATORY ON THE PART OF THE A.O TO RECORD HIS SATISFACTION AS TO WHY THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENSES INCURRED FOR EARNING OF THE EXEMPT DIVIDEND INCOME WAS NOT TO BE ACCEPTED IS NO MORE RES INTEGRA AND HAS BEEN SETTLED BY THE HON BLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT & ANR. (2017) 394 ITR 449 (SC) . THE HONBLE APEX COURT IN ITS AFORESAID ORDER HAD OBSERVED THAT IT IS OBLIGATORY ON THE PART OF THE A.O TO RECORD HIS SATISFACTION THAT HAVI NG REGARD TO THE ACCOUNTS OF THE ASSESSEE AS P A G E | 7 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) PLACED BEFORE HIM, IT WAS NOT POSSIBLE TO GENERATE THE REASONABLE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE . IT WAS OBSERVED BY THE HONBLE APEX COURT THAT IT WAS ONLY AFTER THE A. O HAD RECORDED HIS DIS SATISFACTION AS REGARDS THE CORRECTNE SS OF THE CLAIM OF THE ASSESSEE THAT THE PROVISIONS OF SEC.14A(2) AND (3) R.W. RULE 8D COULD BE INVOKED . IT WAS OBSERVED BY THE HONBLE APEX COURT, AS UNDER: 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUATION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002 - 2003. SUB - SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE SD OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMINATION O F EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF T HE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8 D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. 9. WE FIND THAT THE CLAIM OF THE ASSESSEE AS REGARDS THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE I.T ACT WAS REJECTED BY THE A.O IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2011 - 12. HOWEVER, ON APPEAL T HE TRIBUNAL HAD VACATED THE DISALLOWANCE THAT WAS MADE BY THE A.O UNDER SEC. 14A R.W. RULE 8D DE H ORS RECORDING OF SUCH SATISFACTION ON HIS PART, BY RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT & ANR. (2017) 394 ITR 449 (SC) , OBSERV ING AS UNDER : WE HAVE 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 VIEW THAT AS THE A.O HAD FAILED TO COMPLY WITH THE STATUTORY REQUIREMENT OF RECORDING HIS SATISFACTION AS TO WHY TH E CLAIM OF DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SEC. 14A IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS NOT TO BE ACCEPTED, HAVING REGARD TO ITS ACCOUNTS, IT CAN SAFELY BE CONCLUDED THAT THE MANDATE OF THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (2017) 394 I TR449 (SC) HAD NOT BEEN SATISFIED BY HIM. WE THUS, HOLDING A CONVICTION THAT AS THE ORDER P A G E | 8 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) PASSED BY THE A.O IN THE CASE BEFORE US, IS NOT IN CONFORMI TY WITH THE JUDGMENT OF THE HON BLE APEX COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY (SUPRA), HENCE THE DISALLOWANCE OF RS.48,29,256/ - MADE BY THE A.O CANNOT BE SUSTAINED AND IS LIABLE TO BE VACATED. WE THUS, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE TH E FURTHER DISALLOWANCE OF RS.48,29,265/ - MADE BY THE A.O UNDER SEC. 14A R.W RULE 8D. 10. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT & ANR. (2017) 394 ITR 449 (SC) AND THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y. 2011 - 12, THEREIN VACATE THE FURTHER DISALLOWANCE OF RS. 42,15,470/ - MADE BY THE A.O UNDER SEC.14A R.W. RULE 8D . 11. AS WE HAVE VACATED THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 14A R.W RULE 8D ON THE GROUND OF INVALID ASSUMPTION OF JURISDICTION BY THE A.O, THEREFORE, THE OTHER GROUNDS WHICH HAD BEEN RAISED BY THE ASSESSEE BEFORE US FOR ASSAILING THE SAID DISALLOW ANCE MADE BY THE A.O , HAVING BEEN RENDERED AS ACADEMIC IN NATURE ARE THEREFORE LEFT OPEN AND WE REFRAIN FROM ADVERTING TO AND THEREIN ADJUDICATING THE SAME. 1 2 . THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNC ED IN THE OPEN COURT ON 2 6 . 12.2018 S D / - S D / - ( SHAMIM YAHYA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 26.12.2018 PS. ROHIT P A G E | 9 ITA NO. 6803/MUM/2016 A.Y. 2012 - 13 ANSHUL SPECIALITY MOLECULES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CC - 6(3) / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI