SAB ELECTRONICS LTD ( NOW KNOWN AS ARTHEON ELECTRONICS LTD), MUMBAI V. DCIT 7(2), MUMBAI

ITA 1127/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3472 (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.1127/MUM/2012 ( / ASSESSMENT YEAR :2006 - 07 M/S. SAB ELECTRONICS LTD., (NOW KNOWN AS ARTHEON ELECTRONICS LTD.,) 201, SUMER KENDRA, P.B. MARG, WORLI, MUMBAI - 400 018 / VS. THE DCIT,7 (2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACS 6991H ( / APP ELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: NONE / RESPONDENT BY: SHRI VISHWAS JADHAV / DATE OF HEARING :17.03. 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 30.9.2011 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 CONFIRMING THE DISALLOWANCE OF RS. 1,41,774/ - U/S. ITA NO. 1127/M/2012 2 14A OF INCOME TAX ACT, 1961 AGAINST THE DIVIDEND INCOME DECLARED BY THE ASSESSEE. 3.1. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED I N THE MANUFACTURING OF TELEPHONE & EPABX SYSTEMS, TRADING OF DRY CELL, BATTERIES, TORCHES ETC, FILED ITS RETURN OF INCOME ON 02.11.2006 DECLARING INCOME OF RS. 9,83,220/ - / - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 31.12.20 0 8 DETERMINING THE INCOME AT RS. 11,66,160/ - . WHILE COMPUTING THIS INCOME, THE ASSESSING OFFICER DISALLOWED RS. 1,82,934/ - 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 T HE AVERAGE WEIGHTED INVESTMENTS AND TREATED THIS AMOUNT AS THE EXPENSES INCURRED FOR EARNING DIVIDEND INCOME BY THE ASSESSEE. ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW RS. 1,41,774/ - BASED ON THE WORKING FURNISHED BY THE ASSESS EE BEING 0.5% OF THE AVERAGE WEIGHTED INVESTMENT. 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. DEPARTMENT AL REPRESENTATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSING OFFICER DISALLOWED 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 PROSPECTIVE IN NATURE AS HELD BY THE JURISDICTIONAL HIGH COURT IN ITA NO. 1127/M/2012 3 THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT (328 ITR 81)AND ALSO THAT REASONABLE DISALLOWANCE IN RESPECT OF EXPENSES ATTRIBUTABLE FOR EARNIN G TAX FREE INCOME SHOULD BE DISALLOWED, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW TO RS. 1,41,774/ - WHICH IS THE CALCULATION SUBMITTED BY THE ASSESSEE BEFORE HIM AS PER RULE 8D(2)(III) BEING 0.5% OF AVERAGE INVESTMENTS. HAVING HELD THAT RULE 8D IS PROS PECTIVE IN NATURE, THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO DISALLOW TO RS. 1,41,774/ - 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. SI NCE THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE 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. 1,20,000/ - WOULD MEET THE ENDS OF JUSTICE. THU S, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS.1,20,000/ - AS AGAINST RS.1,41,774/ - 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. 1127/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