NESCO LTD, MUMBAI V. ADDL CIT 9(2), MUMBAI

ITA 1071/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7746 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 22-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C P PATHAK
• Section: 143(3); 14A

Judgement Text

I.T.A NO.1071/ MUM/2010 NESCO LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, J BENCH, MUMBAI. BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.1071/ MUM/2010 ASSESSMENT YEAR: 2006-07 NESCO LIMITED .. APPELLANT NESCO ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI-63 PA NO.AAACN 1222 E VS ADDL. CIT 9(2) ,. RESPONDENT MUMBAI. APPEARANCES: HARESH P SHAH, FOR THE APPELLANT C.P.PATHAK, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 16 TH DECEMBER, 2009, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2006 -07. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO C ONFIRMATION OF ADDITION OF RS.18,00,734 UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME T AX ACT, 1961. 3. FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME OF RS.2,08,18,146 AND ON ITS OWN THE ASSESSEE HAS ADDED BACK A SUM OF RS. 1,87,577 ON EARNING THE DIVIDEND INCOME. HOWEVER, RELYING ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF DAGA CAPITAL I.T.A NO.1071/ MUM/2010 NESCO LIMITED 2 MANAGEMENT P LTD., 117 ITD 169(MUM)(SB), THE AO APP LIED RULE 8D AND DISALLOWED RS.18,00,734. THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. 4. LEARNED REPRESENTATIVES AGREE THAT SO FAR AS THE QUESTION OF RULE 8D IS CONCERNED, THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESEE B Y THE HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81), WHEREIN, IT HAS BEEN HELD THAT RULE 8D OF THE INCOME TAX RULES, 19 62 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008-09. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CASE IS 2007-08 AND, THEREFORE, RULE 8D IS NOT APPLICABLE IN THE PRESENT CASE. THE HONBLE HIGH COURT HAS HELD THAT A REASONABLE DISALLOWANCE FOR EXPENSES INCURRED IN EARNING DIVIDEND INCOME IS NEVERTHELESS TO BE COMPUTED BY THE AO. IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE MFG CO. LTD (SUPRA) AND A S AGREED TO BY THE PARTIES, WE REMIT THE ISSUE TO THE FILE OF THE AO TO RE-COMPUTE THE DISAL LOWANCE U/S.14A IN THE LIGHT OF THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ BOYCE MFG CO. LTD (SUPRA). 5. THIS ISSUE IS THUS ALLOWED FOR STATISTICAL PURPO SES. 6. THE NEXT ISSUE RELATES TO CONFIRMATION OF DISALL OWANCE OF MISCELLANEOUS EXPENDITURE OF RS.1,50,755. 7. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE AS SESSEE HAD CLAIMED RS.30,15,041 AS MISCELLANEOUS EXPENSES. THE ASSESSING OFFICER AFTE R EXAMINING THE DETAILS FURNISHED BEFORE HIM FOUND THAT THE SOME OF THE EXPENSES ARE NOT AME NABLE FOR VERIFICATION AND, ACCORDINGLY, DISALLOWED RS.3,01,510 BEING 10% OF THE MISCELLANEO US EXPENSES. ON APPEAL, THE CIT (A),THE CIT(A) RESTRICTED THE DISALLOWANCE TO 50% OF THE AM OUNT DISALLOWED AND, ACCORDINGLY, THE ASSESSEE GET RELIEF OF RS.1,50,755. HOWEVER, TO ME ET THE ENDS OF JUSTICE AND CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITH THE CONSENT OF THE PARTIES, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 20% O F THE DISALLOWED AMOUNT. THE ASSESSEE GETS RELIEF OF RS.60,302. 8. THIS ISSUE IS THUS PARTLY ALLOWED. I.T.A NO.1071/ MUM/2010 NESCO LIMITED 3 9. IN THE RESULT, APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2011 SD/- (D.K.AGARWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 31 ST MARCH, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),20, MUMBAI 4. COMMISSIONER OF INCOME TAX, 9 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.1071/ MUM/2010 NESCO LIMITED 4