IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1845 OF 2014 Hinduja Ventures Ltd. Appellant Vs. Asst. Commr. of Income Tax, Mumbai 400 020 Respondent Ms Shobha Jagtiani with Mr. Varun Ohri i/by D.M. Harish & Co. for Appellant. Mr. Arvind Pinto for Respondent. CORAM: S.C. DHARMADHIKARI & PRAKASH D. NAIK, JJ. DATE : SEPTEMBER 12, 2017 P.C: 1. This is assessee's appeal. It challenges order passed by Income Tax Appellate Tribunal, Mumbai H Bench in Income Tax Appeal No.1534/Mum/2012 dated 26 3 2014. 2. counsel for assessee would submit that proposed questions at pages 13 & 14, paragraph 37(I) to (V), Page 1 of 7 903-ITXA-1845.2014.doc are all substantial questions of law and arising from Tribunal's order. 3. We have carefully perused this order of Tribunal. Tribunal dealt with grounds of appeal in memo of appeal of assessee. grounds of appeal challenging order of First Appellate Authority dated 16 12 2011 are noted at running pages 88 & 89, para 1 of Tribunal's order. Then, in para 3 of order under challenge, Tribunal refers to assessment proceedings and finding of Assessing Officer that assessee had received dividend income from investment in mutual funds, amounting to Rs.9.58 crores and it was claiming exemption under Section 10(34) of Income Tax Act, 1961 (for short, Act ) for said income. assessee had also claimed exemption under Section 10(38) of Act of Rs.1.05 crore on account of Long Term Capital Gain on transfer of shares/mutual funds. Assessing Officer held that company could not earn dividend without its existence and management, that investment decisions were complex and required substantial market research day to day analysis and Page 2 of 7 903-ITXA-1845.2014.doc that dividend income could not be earned without incurring expenditure, that term 'expenditure' appearing in Section 14A included direct as well as indirect expenses administrative/managerial/financial. Then Assessing Officer referred to Judgment of this Court in case of Godrej and Boyce Mfg. Co. Ltd. vs Deputy Commissioner of Income Tax and Another, reported in (2010) 328 ITR 81 (Bom). He also referred to Rule 8D of Income Tax Rules, 1962 (for short, Rules ). findings of Assessing Officer and determining disallowance so also that of First Appellate Authority are mentioned in great details by Tribunal in paragraph 4. In paragraph 5 is argument of assessee, reiterated before us, that Assessing Officer had no jurisdiction to apply this section and rule, and that Assessing Officer has not recorded his satisfaction before invoking that provision. It is that argument of assessee's representative and to contrary of Department's representative which are noted in para 5 of Tribunal's order. 4. Thereafter, in para 6, Tribunal held as under: Page 3 of 7 ::: Uploaded on - 14/09/2017 ::: Downloaded on - 19/09/2017 12:02:17 ::: suresh 903-ITXA-1845.2014.doc 6. We have heard rival submissions and perused material before us. We find that assessee had earned exempt income of Rs.10.63 Crores during year under appeal, that it had claimed expenditure at Rs.2.10 Crores and Rs.4.32 Crores under heads interest expenditure and administrative expenditure respectively, that it did not make any disallowance u/s.14A of Act. We find that AO has mentioned that as why submission made by assessee; with regard to addition to be made u/s.14A of Act; was not convincing. In our opinion it is not must that AO should specifically use words that he is not satisfied about claim made by assessee. provisions of Act expect that AO should record his satisfaction. Recording of satisfaction can be in any form but basic thing is that his conclusion should show application of mind about not agreeing with submissions made by assessee with regard to disallowance to be made u/s.14A. In our opinion AO had recorded satisfaction before making disallowance. We find that FAA had specifically asked assessee to furnish cash flow statements so that logical conclusion can be drawn about disallowance to be made for interest payment. It is also fact that assessee is having mixed funds. In these circumstances, said statement becomes very important so that reasonable conclusion can be drawn. AR, during course of hearing before us, had made submissions about availability of reserves share capital, profits etc. In our opinion, considering peculiar facts and circumstances of case, in interest of justice, matter should be restored back to file of FAA to decide issue of disallowance u/s.14A of Act with regard to interest expenditure. He is directed to afford reasonable opportunity of hearing to Page 4 of 7 ::: Uploaded on - 14/09/2017 ::: Downloaded on - 19/09/2017 12:02:17 ::: suresh 903-ITXA-1845.2014.doc assessee. 5. After recording its finding and conclusion as above, and remanding case back, we do not think that we should entertain this appeal. There is no prejudice caused for each and every aspect of question of law, termed as substantial and proposed before us by assessee, would be examined on remand by authority. remand is clear inasmuch as entire issue of disallowance under Section 14A of IT Act, 1961 is restored; that issue will be considered afresh on merits and in accordance with law. Hence, we do not find any necessity to entertain this appeal. 6. At this stage, we are informed that Tribunal delivered this order in relation to Assessment Year 2008 09. There are subsequent assessment orders in relation to which this issue again cropped up. At that time matter was sent back to Assessing Officer. It is Assessing Officer who has examined same and he is yet to pass final order. request of assessee's counsel is that, instead of matter Page 5 of 7 ::: Uploaded on - 14/09/2017 ::: Downloaded on - 19/09/2017 12:02:17 ::: suresh 903-ITXA-1845.2014.doc being remanded in this case to First Appellate Authority, it should be remanded to Assessing Officer so as to ensure consistency in findings and avoiding any contrary or conflicting opinion. 7. We have been informed that order of remand by Tribunal and to First Appellate Authority has not gained finality, in sense there is no order passed by First Appellate Authority pursuant to remand, placed on record. Mr. Pinto does not object to matter, therefore, being sent back to Assessing Officer. 8. Therefore, beyond modifying ultimate direction of remand to First Appellate Authority, we direct that matter must go back to Assessing Officer instead of First Appellate Authority for Assessment Year 2008 09 as well. Assessing Officer must pass fresh order on merits and in accordance with law, uninfluenced by his own order passed earlier or First Appellate Authority or directions/observations in para 6 of order under appeal. Page 6 of 7 903-ITXA-1845.2014.doc 9. This appeal is disposed of with above modification. There will be no order as to costs. (PRAKASH D. NAIK, J.) (S.C. DHARMADHIKARI, J.) Page 7 of 7 HindujaVenturesLtd. v. Asst. Commr. of Income-tax, Mumbai