SALORA FINANACE LTD ( NOW KNOWN AS ARTHEON FINANCE LTD), MUMBAI V. DCIT 7(2), MUMBAI

ITA 1126/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3478 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER / I .T A NO. 1126/MUM/2012 ( / ASSESSMENT YEAR : 2006 - 07 M/S. SALORA FINANCE LTD., (NOW KNOWN AS ARTHEON FINANCE LTD.,) 201, SUMER KENDRA, P.B. MARG, WORLI, MUMBAI - 400 018 / VS. THE DCIT - 7 (2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAECS 5943F ( / APP ELLANT ) .. ( / RESPONDENT ) / APP ELLANT BY: NONE / RESPONDENT BY: SHRI VISHWAS JADHAV / DATE OF HEARING : 17 . 0 3 . 201 6 / DATE OF PRONOUNCEMENT : 22 . 03.2016 / O R D E R PER C.N. PRASAD, JM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 13 , MUMBAI DATED 27.9.2011 PERTAINING TO ASSESSMENT YEAR 2006 - 07 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF NOTICE BY REGD. A.D., THEREFORE WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND DISPOSED OF THIS MATTER EX - PARTE ON MERIT. 3. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN C ONFIRMING THE DISALLOWANCE OF RS. 1,32,244/ - AND ITA NO. 1126/M/2012 2 ENHANCED THE DISALLOWANCE TO RS. 1,33,378/ - BEING 0.5% OF AVERAGE WEIGHTED INVESTMENTS U/S.14A OF THE ACT. 3.1. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF BILL DISCOUNTING AND FINANCE, FILED ITS RETURN OF INCOME ON 18.11.2006 DECLARING INCOME OF RS. 1,71,41,939/ - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 31.12.20 0 8 DETERMINING THE INCOME AT RS. 1,72,74,180/ - . WHILE COMPUTING THIS INCOME, THE ASSESSING OFFIC ER DISALLOWED RS. 1,32,244/ - INVOKING THE PROVISIONS OF SEC. 14A R.W. RULE 8D OF I.T. RULES . 3.2. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE UNDER RULE 8D (2)(III) BEING 0.5% OF THE AVERAGE WEIGHTED INVESTMENTS AND TREATED THIS AMOUNT AS THE EXPE NSES INCURRED FOR EARN ING DIVIDEND INCOME OF RS. 9,84,999/ - BY THE ASSESSEE . ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW RS. 1,33,378/ - BASED ON THE WORKING FURNISHED BY THE ASSESSEE BEING 0.5% OF THE AVERAGE WEIGHTED INVESTMEN T. 4. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES INVOKING THE PROVISIONS OF SEC. 14A R.W. RULE 8D AND MAKING DISALLOWANCE. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER DISALLOW ED THE EXPENSES ATTRIBUTABLE FOR EARNING DIVIDEND INCOME BY CALCULATING AT 0.5% OF THE AVERAGE WEIGHTED INVESTMENTS APPLYING RULE 8D(2)(III). THE LD. CIT(A) HAVING NOTED IN THE ORDER THAT RULE 8D IS PROSP ECTIVE IN NATURE AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT (328 ITR 81)AND ITA NO. 1126/M/2012 3 ALSO THAT REASONABLE DISALLOWANCE IN RESPECT OF EXPENSES ATTRIBUTABLE FOR EARNING TAX FREE INCOME SHOULD BE DISALLOWED , H E DIRE CTED THE ASSESSING OFFICER TO DISALLOW RS. 1,33,378/ - WHICH IS THE CALCULATION SUBMITTED BY THE ASSESSEE BEFORE HIM AS PER RULE 8D(2)(III) BEING 0.5% OF AVERAGE INVESTMENTS . HAVING H ELD THAT RULE 8D IS PROSPECTIVE IN NATURE, THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECT ING THE ASSESSING OFFICER TO DISALLOW RS. 1,33,378/ - AS PER RULE 8D(2)(III) OF I.T. RULES. RULE 8D WAS INSERTED BY THE I. T (FIFTH AMENDMENT) RULES 2008, W.E.F. 24.3.20 0 8 AND IS PROSPECTIVE. SINCE THE PROVISIONS OF RULE 8D ARE NOT APPLI CABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, REASONABLE DISALLOWANCE IN RESPECT OF EXPENSES INCURRED FOR EARNING TAX FREE INCOME SHOULD BE MADE IN VIEW OF THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF GODREJ & BOYCEE MFG. CO. (SUPRA). THUS, TAKING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES INTO ACCOUNT IN THIS CASE, WE FEEL THAT THE EXPENSES ATTRIBUTABLE FOR EARNING DIVIDEND INCOME IF ESTIMATED AT RS. 50,000/ - WOULD MEET THE ENDS OF JUSTICE. THUS, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS. 50,000/ - AS AGAINST RS. 1,33,378/ - AS DIRECTED BY THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH , 201 6 . SD/ - SD/ - ( RAMIT KOCHAR ) ( C.N. PRASAD ) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI ; DATED : 22 ND MARCH , 201 6 . . ./ RJ , SR. PS ITA NO. 1126/M/2012 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI