Delhi High Court
Amway India Enterprises Pvt. Ltd. vs Income Tax Officer on 3 December, 2014
Author: Sanjiv Khanna
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 585/2014
Date of decision: 3rd December, 2014
AMWAY INDIA ENTERPRISES PVT. LTD. ..... Appellant
Through Mr. M.S. Syali, Sr. Advocate with Mr.
Mayank Nagi, Advocate.
versus
INCOME TAX OFFICER ..... Respondent
Through Mr. N.P. Sahni, Sr. Standing Counsel
with Mr. Nitin Gulati, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL)
Having heard counsel for the parties, we frame the following
substantial question of law in this appeal which relates to the
assessment year 2008-09:-
"Whether the Income Tax Appellate Tribunal was
right in holding that the Assessing Officer had
accorded implicit satisfaction under Section 14A(2) of
the Income Tax Act, 1961, which got converted into
explicit satisfaction by the reason on discussion in the
order passed by the Commissioner of Income Tax
(Appeals)?"
2. Section 14A of the Income Tax Act, 1961 reads as under:-
"14A. (1) For the purposes of computing the total income
under this Chapter, no deduction shall be allowed in
respect of expenditure incurred by the assessee in relation
to income which does not form part of the total
income under this Act.
(2) The Assessing Officer shall determine the amount of
expenditure incurred in relation to such income which
does not form part of the total income under this Act in
accordance with such method as may be prescribed, 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
this Act.
(3) The provisions of sub-section (2) shall also apply in
relation to a case where an assessee claims that no
expenditure has been incurred by him in relation to
income which does not form part of the total income under
this Act:
Provided that nothing contained in this section shall
empower the Assessing Officer either to reassess
under section 147 or pass an order enhancing the
assessment or reducing a refund already made or
otherwise increasing the liability of the assessee
under section 154, for any assessment year beginning on
or before the 1st day of April, 2001."
3. The aforesaid provision was interpreted by the Delhi High Court
in Maxopp Investment Ltd. versus CIT [2010] 347 ITR 272 (Del) and
it was held that sub-section (2) to Section 14A of the Income Tax Act,
1961 (Act, for short) mandates and requires the Assessing Officer to
record his satisfaction on the correctness of the claim made by the
assessee in respect of the expenditure in relation to the income, which
does not form part of the total income before embarking on and
applying Rule 8D of the Income Tax Rules, 1962.
4. Similar interpretation has been given by the Bombay High Court
in the case of Godrej and Boyce Mfg. Co. Ltd. versus CIT [2010] 328
ITR 81 (Bombay).
5. The contention raised by the appellant-assessee in the present
appeal is that no such satisfaction as mandated and required under Section
14A(2) of the Act was recorded by the Assessing Officer either in the
order sheet or in the assessment order. The Income Tax Appellate
Tribunal (Tribunal, for short) in the impugned order has noticed the said
fact, but recorded that there was an implicit satisfaction. The Tribunal
has further mentioned that the Commissioner of Income Tax (Appeals)
while deciding the contention of the assessee had examined the said facts
and had recorded explicit satisfaction.
6. Tribunal by the impugned order after recording the said findings
has passed an order of remand to the Assessing Officer.
7. Learned counsel for the appellant-assessee has made a statement at
the Bar, which we have taken on record, that during the course of remand
proceedings, it will be open to the Assessing Officer to go into the
question whether or not the disallowance made by the assessee on
account of expenditure in relation to exempt income should be accepted
and in case the Assessing Officer is not satisfied, he can record his
dissatisfaction and thereafter proceed as per law. Learned counsel for the
appellant-assessee submits that in preceding two years, pursuant to the
order of remand passed by the Tribunal, the matter is pending before
the Assessing Officer.
8. The net effect of the aforesaid statement is that during the course
of remand proceedings, the Assessing Officer will go into the question
of disallowance under Section 14A of the Act made by the assessee
and after examination, if he is not satisfied with the claim, he can
proceed as per law.
9. In view of the said statement, we would not like to examine the
controversy and question, whether the satisfaction recorded by the
Assessing Officer was implicit and whether implicit satisfaction would
meet the requirement and mandate of sub-section (2) to Section 14A of
the Act. We also need not go into the question, whether the
Commissioner of Income Tax (Appeals) can record satisfaction so as
to meet the statutory mandate of Section 14A of the Act. The said
aspect/questions are not required to be decided, being of academic
interest in the present appeal.
10. The question of law is accordingly answered in terms of the
concession given by the learned counsel for the assessee. Accordingly,
the observations of the Tribunal that there was implicit satisfaction of
the Assessing Officer and explicit satisfaction of the Commissioner of
Income Tax (Appeals) shall be treated as set aside. However, it will be
open to the Assessing Officer to examine the claim of the assessee as
per Section 14A of the Act and proceed in accordance with law.
The appeal is disposed of. No costs.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
DECEMBER 03, 2014
NA
