IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 737 OF 2017 Pr. Commissioner of Income Tax 7 .. Appellant. v/s. M/s. Mazagaon Dock Ltd., .. Respondent. Mr. Suresh Kumar, for Appellant. CORAM: M.S.SANKLECHA & NITIN JAMDAR, JJ. DATE : 20th AUGUST, 2019. P.C: This Appeal under Section 260 of Income Tax Act, 1961 (the Act), challenges order dated 1st February, 2016 passed by Income Tax Appellate Tribunal (the Tribunal). impugned order dated 1st February, 2016 is in respect of Assessment Year 2004 05. 2 Revenue urges following questions of law, for our consideration: (a) Whether on facts and in circumstances of case and in law, Tribunal was justified in directing AO to recompute disallowance u/s. 14A on reasonable basis relying on judgment of this Court in case of Godrej & Boyce Manufacturing Company Ltd., v/s. DCIT (2010), 328 ITR 81? (b) Whether on facts and in circumstances of case and in law, Tribunal is correct in allowing netting off prior period income against prior period expenditure without ascertaining nexus between income and expenditure? 3 Re. Question (a): S.R.JOSHI 1 of 3 itxa-737-2017 (i) Respondent had made investment in Company called M/s. Goa Shipyard Ltd., (GSL). Respondent received dividend income from M/s. GSL. Assessing Officer invoked Section 14A of Act read with Rule 8D of Rules and disallowed expenditure claimed by Respondent on earning dividend income. In appeal, Commissioner of Income Tax (Appeals) allowed Respondent s appeal and held that disallowance of 5% of dividend income on test of reasonable basis would be appropriate disallowance under Section 14A of Act; (ii) Being aggrieved, Revenue carried issue in appeal to Tribunal. Tribunal noted fact that Rule 8D of Rules would not be applicable prior to Assessment Year 2008 09, as held by this Court in Godrej & Boyce Manufacturing Company Ltd., v/s. DCIT 328 ITR 81. In above view, Tribunal upheld reasonable basis for disallowance of expenditure to earn exempted income at 5% of investment as held by Commissioner of Income Tax (Appeals). Thus, dismissed Revenue s appeal ro Assessment Year 2004 05. (iii) We note that decision of Tribunal is in accord with view of this Court, as approved by Hon'ble Supreme Court. Therefore, question as framed does not give rise to any substantial question of law. Thus, not entertained. 4 Re. Question (b): (i) Respondent had prior period income and prior period expenses. Respondent had set off two and offered only net amount of expenses for disallowance. However, both Assessing Officer and Commissioner of Income Tax (Appeals) did not S.R.JOSHI 2 of 3 itxa-737-2017 accept that method setting off of prior period income with prior period expenses as claimed by Respondent while disallowing expenditure. (ii) However, in further appeal, Tribunal held that Respondent was justified in computing disallowance after setting off prior period income against prior period expenses. In fact, Tribunal noted fact that for Assessment Year 2007 08, Revenue had accepted net income offered after set off of prior period income with prior period expenses. This is in that year, where expenses of prior period were less than prior period income. (iii) We find that view taken by Tribunal on facts cannot be found fault with. This, particularly, as Revenue for subsequent period accepted this practice of set off, which resulted in income and subjected it to tax. basis/ principles for allowing set off of prior period income with prior period expenses, has to be consistent for years. Therefore, view taken by Tribunal cannot be found faulted with. (iv) In view of above, question as framed does not give rise to any substantial question of law. Thus, not entertained. 5 Accordingly, Appeal dismissed. (NITIN JAMDAR,J.) (M.S.SANKLECHA,J.) S.R.JOSHI 3 of 3 Pr. Commissioner of Income-tax-7 v. Mazagaon Dock Ltd