Machino Techno Sales Ltd., Kolkata V. DCIT, Circle - 11, Kolkata, Kolkata

CO 6/KOL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7215 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-02-2010
• Court: TRIBUNAL
• Department Lawyers: L K S DEHIYA
• Assessee Lawyers: S M SURANA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . , !' ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] C.O. NO.6/KOL/2010 # # # # /IN I.T.A NO. 92/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2005-06 MACHINO TECHNO SALES LTD. VS. DEPUTY COMMISSION ER OF INCOME-TAX, (PAN:AACCM2561R) CIRCLE-11, KOLKATA. ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 30.05.2012 DATE OF PRONOUNCEMENT: 30.05.2012 )* - . ! /FOR THE APPELLANT: SHRI S. M. SURANA +,)* - . ! /FOR THE RESPONDENT: SHRI L. K. S. DEHIYA !/ / ORDER IMMEDIATELY UPON CONCLUSION OF HEARING OF THIS APPE AL ON 30.05.2012, THE BENCH PASSED THE FOLLOWING ORDER: 30TH MAY, 2012 AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE FAIR LY CONCEDED THAT THE ONLY ISSUE TO BE ADJUDICATED LEFT NOW IS GROUND NO.1 AS RAISED BY WAY OF ADDITIONAL GROUND, I.E. THE DISALLOWANCE MADE BY INVOKING RULE 8D R.W.S. 14A OF THE ACT. ASSESSEES COUNSEL CONCEDED THAT THE DISALLOWANCE MADE BY AO I.E. 5% O F EXEMPTED INCOME IS FAIR AND REASONABLE. AFTER HEARING THE LD . SR. DR, WE ALLOW THE ISSUE OF ASSESSEES C.O. AND CONFIRM THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER. ORDER PRONOUNCED IN THE OPEN COURT. DETAIL ORDER WILL FOLLOW. IN ACCORDANCE WITH THE ABOVE, THE REASONED ORDER IS NOW SET OUT AS FOLLOWS: PER MAHAVIR SINGH, JM/ , : THIS CROSS OBJECTION BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO. 79/CIT(A)-XI/JCIT, RANGE-11/07-08 DATED 18.09.2009. ASSESSMENT WAS FRAMED BY JCIT, RANGE-11, KOLKATA U/S.143(3) OF THE INCOME-T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORD ER DATED 28.12.2007. 2. THE ITA NO. 92/K/2010 AND CO NO. 6/K/2010 WAS DI SPOSED OF ON 13.04.2011, WHEREIN IN THE CO THERE IS ADDITIONAL GROUND, WHICH ACCORDI NG TO LD. COUNSEL WAS NOT DEALT WITH IN THE 2 CO . 6/K/2010 MACHINO TECHNO SALES LTD. A.Y. 05-06 . ORDER OF TRIBUNAL DATED 13.04.2011. HENCE, LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE FOLLOWING ADDITIONAL GROUND MAY BE ADJUDICATED UPON : 1. FOR THAT THE LD. CIT(A) ERRED IN APPLYING RULE 8D READ WITH SECTION 14A OF THE I. T. ACT, 1961 WHEN NO EXPENSES WERE INCURRED FOR EARNIN G THE DIVIDEND. 3. THE ONLY ISSUE IN THIS CO OF THE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) APPLYING RULE 8D R.W.S. 14A OF I. T. RULES, 1962 WHEN NO EXP ENSES WERE INCURRED FOR EARNING DIVIDEND INCOME. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSES SEE HAS NOT ADDED BACK ANY PROPORTIONATE MANAGEMENT EXPENSES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME. HENCE, THE AO CONSIDERING THE EXEMPTED INCOME AT RS. 7,02,105/- DISALLOWED 5% OF PROPORTIONATE EXPENSES AT RS.35,105/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DIRECTED THE AO TO FOLLOW THE METHOD PRESCRIBED IN RULE 8D OF I. T. RU LES, 1962 FOR ARRIVING AT THE PROPORTIONATE EXPENSES TO BE DISALLOWED IN RESPECT OF EXEMPTED IN COME. THE RELEVANT FINDING OF CIT(A) IN PARA 5.1.3 READS AS UNDER: 5.1.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AP PELLANT AND I FIND THAT THE SAME IS NOT TENABLE. THE A.O HAS RIGHTLY INVOKED THE PROVI SIONS OF SEC. 14A OF THE I. T. ACT. RECENTLY, HONBLE MUMBAI ITAT, SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. IN ITS ORDER DATED 20.10.2008 (ITA NO.8057/MUM/03 ETC.) HAS UPHELD THE APPLICABILITY OF RULE 8D OF THE I. T. RU LES READ WITH SECTION 14A OF THE ACT IN RESPECT OF ALL PENDING PROCEEDINGS AS ON 24.03.2008 , INCLUDING APPEALS. THE HONBLE ITAT, KOLKATA BENCH IN THE CASE OF ACIT V. SHREE CA PITAL SERVICES LTD. (ITA NO.1596/KOL/2008 DT. 9.1.09) FOLLOWING THE AFORESAI D SPECIAL BENCH DECISIONS, UPHELD THE METHOD PRESCRIBED UNDER RULE 8D. RESPECTFULLY FOLLOWING THE HONBLE ITAT DECISIONS I UPHELD THE ACTION OF THE A.O. IN APPLYI NG THE PROVISION OF SEC. 14A OF THE I. T. ACT. HOWEVER, THE A.O. IS DIRECTED TO FOLLOW TH E METHOD PRESCRIBED IN RULE 8D OF I. T. RULES FOR ARRIVING AT THE PROPORTIONATE EXPENSES TO BE DISALLOWED IN RESPECT OF EXEMPTED INCOME. WE FIND THAT THE RELEVANT ASSESSMENT YEAR INVOLVED IS 2005-06 AND RULE 8D OF I. T. RULES CANNOT BE APPLIED IN THE INSTANT CASE. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 IT R 81 (BOM.) HAS ALREADY HELD APPLICABILITY OF RULE 8D OF THE RULES AS PROSPECTIV E AND NOT RETROSPECTIVE W.E.F. ASSESSMENT YEAR 2008-09. WE FIND THAT THE AO HAS MADE DISALLO WANCE AT 5% BY GIVING FOLLOWING FINDING : IT IS AN FACT THAT SOME EXPENDITURE HAS TO BE INCU RRED FOR EARNING EXEMPTED INCOME. THE QUANTUM OF EXPENDITURE MAY DIFFER BUT IT IS NOT POSSIBLE THAT THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENDITURE WHATSOEVER. IN TH E ABSENCE OF THEDETAILS, THE DISALLOWANCE ON THIS ACCOUNT IS TAKEN ON A FAIR AND REASONABLE BASIS AT 5% OF THE EXEMPTED INCOME. IN THERESULT, THE AMOUNT OF RS.35 ,105 BEING 5% OF THE EXEMPTED INCOME, IS DISALLOWED AND ADDED BACK IN THE TOTAL I NCOME OF THE ASSESSEE. 3 CO . 6/K/2010 MACHINO TECHNO SALES LTD. A.Y. 05-06 . THE LD. COUNSEL FOR THE ASSESSEE FAILRLY CONCEDED T HE POSITION THAT HE HAS NO OBJECTION IF THE DISALLOWANCE MADE BY AO IS UPHELD. PRINCIPALLY, WE ARE IN AGREEMENT WITH THE ASSESSEE THAT RULE 8D OF THE RULES WILL NOT APPLY IN THE PRESENT ASSESSMENT YEAR IN VIEW OF THE DECISION OFL HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MFG. CO. LTD. (SUPRA) BUT THE DISALLOWANCE MADE BY AO AS AGREED BY LD. COUNSEL IS CONFIRMED. 5. IN THE RESULT, ASSESSEES CROSS OBJECTION IS DIS MISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . , !' , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED: 30 TH MAY, 2012 01 $23 4 JD.(SR.P.S.) !/ - +5 6!5&7- COPY OF THE ORDER FORWARDED TO: 1 . )* /APPELLANT MACHINO TECHNO SALES LTD., 8A, ALIPORE ROAD, JINDAL HOUSE, KOLKATA-700 027.. 2 +,)* / RESPONDENT, DCIT, CIRCLE-11, KOLKATA. 3 . /$ ( )/ THE CIT(A) , KOLKATA 4. CIT, 5 . >? +$ / DR, KOLKATA BENCHES, KOLKATA ,5 +/ TRUE COPY, !/$@/ BY ORDER, 3 /ASSTT. REGISTRAR .