ACIT, CHENNAI V. M/s. Sicagen India Ltd., CHENNAI

ITA 1301/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61214 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY PUNGALIA
• Assessee Lawyers: SATH IYANARAYANAN
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1301/MDS/2011 [ASSESSMENT YEAR 2007-08] THE A.C.I.T COMPANY CIRCLE VI(3) CHENNAI 600 034 (APPELLANT) VS. M/S SICAGEN INDIA LTD NO. 534, ANNASALAI, TEYNAMPET CHENNAI 600 018. PAN : AAKCS 5770 J (RESPONDENT) CO NO. 139/MDS/2011 A/O I.T.A. NO. 1301/MDS/2011 [ASSESSMENT YEAR 2007-08] M/S SICAGEN INDIA LTD NO. 534, ANNASALAI, TEYNAMPET CHENNAI 600 018. PAN : AAKCS 5770 J (APPELLANT) VS. THE A.C.I.T COMPANY CIRCLE VI(3) CHENNAI 600 034 (RESPONDENT) REVENUE BY : SHRI SANJAY PUNGALIA, JCIT, ASSESSEE BY : SHRI SATH IYANARAYANAN, ADVOCATE DATE OF HEARING : 06.06.2012 DATE OF PRONOUNCEMENT : 15.06.2012 2 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 O R D E R PER V. DURGA RAO, JM : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-V, CHENNAI DATED 19.04.2011 FOR ASSESSMENT YEAR 2007-0 8. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE MARKETING OF BUILDING MATERIALS, VEHICLE SALES, GOV ERNOR SERVICE, TRAVELS AND CARGO, BOAT BUILDING, PLANTATION AND RU NNING WINDMILLS. THE ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION DECLARING BUSINESS LOSS OF RS. 2,85,57,907. AFTER DUE PROCESS, SCRUTINY ASSESSMENT WAS COMPLETED DETERMINING BUSIN ESS LOSS AT RS. 2,53,13,231/-. THE ONLY GROUND RAISED IN THIS APPE AL RELATES TO DISALLOWANCE U/S 14A OF THE I.T. ACT R.W.R. 8D OF T HE I.T. RULES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD ADMITTED DIVIDEND INCOME OF RS. 85,82,0 00/- AND CLAIMED ENTIRE INCOME AS EXEMPT. THE ASSESSEE COMP ANY WAS GIVEN 3 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 AN OPPORTUNITY TO EXPLAIN WHY PROPORTIONATE AMOUNT OF EXPENDITURE ON EXEMPTED INCOME SHOULD NOT BE DISALLOWED U/S 14A OF THE ACT. THROUGH LETTER DATED 10.12.2009 THE ASSESSEE COMPAN Y HAD ADMITTED TOWARDS DISALLOWANCE OF RS. 11,42,607/- U/ S 14A OF THE ACT. A WORKSHEET SHOWING THE DETAIL ON HOW THE AMO UNT OF DISALLOWANCE FOR RS. 11.42.607/- HAD BEEN ARRIVED A T HAS ALSO BEEN SUBMITTED. ACCORDINGLY, THE ASSESSING OFFICER HAS DISALLOWED RS. 11,42,607/- U/S 14A OF THE ACT AND THE SAME WAS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS). 3. THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) ALL OWED THE APPEAL FILED BY THE ASSESSEE AND DIRECTED THE ASSES SING OFFICER TO DISALLOW 2% OF THE DIVIDEND INCOME EARNED AS EXPENS ES INCURRED TO EARN DIVIDEND INCOME. AGGRIEVED, THE REVENUE CARRIE D THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 4 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 4. THE LD. COUNSEL FOR THE REVENUE SUBMITTED THAT T HERE IS NO BASIS FOR THE LD. COMMISSIONER OF INCOME-TAX(APPEAL S) TO DIRECT THE ASSESSING OFFICER TO DISALLOW 2% OF THE DIVIDEND IN COME AND SUBMITTED THAT THE ASSESSING OFFICER HAD DISALLOWED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER A ND STRONGLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME- TAX(APPEALS). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAIL ABLE ON RECORD. THE ONLY DISPUTE IN THIS APPEAL IS WHETHER THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) IS RIGHT IN DIRECTING THE ASSES SING OFFICER TO DISALLOW 2% OF THE DIVIDEND INCOME OR NOT? HOWEVER , THE LD. COMMISSIONER OF INCOME-TAX(APPEALS), WITHOUT CONSID ERING THE ORDER OF THE AO PROPERLY, DISALLOWED 2% OF THE EXPE NSES ON THE GROUND THAT THE ASSESSEE HAS NOT INCURRED ANY EXPEN DITURE TO EARN 5 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 THE DIVIDEND INCOME. WE ARE UNABLE TO AGREE WITH T HE ABOVE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) THAT THERE IS NO BASIS FOR HIM TO COME TO SUCH A CONCLUSION. IN SIM ILAR CIRCUMSTANCES, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81 [BOM] HELD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOUL D APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVE N PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, T HE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER THE ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIVIDEND 6 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECT ING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE AO SHOULD PROVIDE A REASONABLE OPPORTUNITY TO T HE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. (SUPRA), WE REMIT THE MATTER BACK TO THE F ILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIG H COURT AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THIS GROUND OF APPEAL OF THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. 8. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS ). IN VIEW OF OUR DECISION GIVEN ABOVE IN REVENUES APPEAL, THIS GROUND OF APPEAL 7 ITA NO. 1301/MDS/2011 CO NO 139/MDS/2011 RAISED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND S TANDS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THE 15 TH OF JUNE, 2012, AT CHENNAI. SD/- SD/- (N.S. SAINI) (V. DURGA RAO) ACCOUNTANT MEMBER JU DICIAL MEMBER CHENNAI, DATED THE 15 TH JUNE, 2012. VL/- COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE