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