H V TRANSMISSION LTD, MUMBAI V. ACIT (OSD) 2(1), MUMBAI

ITA 1304/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2333 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 01-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANADHER GUPTA
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Earning of tax free income; Cost of acquisition
• Section: 14A; 37(1); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL H BE NCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NO.1304/MUM/2011 ( / ASSESSMENT YEAR: 2007-08 M/S.TML DRIVELINES LTD., (FORMERLY KNOWN AS H.V. TRANSMISSIONS LTD., 3 RD FLOOR, NANAVATI MAHALAYA, 18, HOMI MODI STREET, HUTATMA CHOWK, MUMBAI-400 001 / VS. THE ACIT (OSD) - 2(1), MUMBAI / I .TA NO.3421/MUM/2012 ( / ASSESSMENT YEAR: 2008-09 M/S.TML DRIVELINES LTD., (FORMERLY KNOWN AS H.V. TRANSMISSIONS LTD., NANAVATI MAHALAYA, 18, HOMI MODI STREET, HUTATMA CHOWK, MUMBAI-400 001 / VS. THE ACIT (OSD) - 2(1), MUMBAI / I .TA NO.3512/MUM/2011 ( / ASSESSMENT YEAR: 2008-09 THE ACIT (OSD) - 2(1), MUMBAI / VS. M/S.TML DRIVELINES LTD., (FORMERLY KNOWN AS H.V. TRANSMISSIONS LTD., 3 RD FLOOR, NANAVATI MAHALAYA, 18, HOMI MODI STREET, HUTATMA CHOWK, MUMBAI-400 001 ./ ./ PAN/GIR NO. AABCH 7626Q H.V. TRANSMISSIONS LTD. 2 ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI P.J. PARDIWALLA / REVENUE BY: SHRI RANADHER GUPTA / DATE OF HEARING :01.06.2016 ! / DATE OF PRONOUNCEMENT :29.07.2016 / O R D E R PER C.N. PRASAD, JM: THESE THREE APPEALS ARE FILED BY THE ASSESSEE AND T HE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-4, MUMBAI PERTA INING TO ASSESSMENT YEARS 2007-08 & 2008-09. ITA NO. 1304/M/2011 A.Y. 2007-08 2. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14 A R.W.R. 8D OF THE ACT. 2.1. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHI LE COMPLETING THE ASSESSMENT INVOKED PROVISIONS OF SEC. 14A R.W. RULE 8D AND FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF IT O VS DAGA CAPITAL MANAGEMENT PVT. LTD., DISALLOWED RS. 5,12,000/-. 2.2. THE ASSESSEE BEFORE THE LD. CIT(A) CONTENDED T HAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOM E AND THEREFORE NO DISALLOWANCE CAN BE MADE U/S. 14A R.W. RULE 8D. THE ASSESSEE CONTENDED THAT PROVISIONS OF SEC. 14A HAVE NO APPLI CATION TO THE FACTS OF THE ASSESSEES CASE. HOWEVER, THE LD. CIT(A) CO NFIRMED THE ORDER OF THE ASSESSING OFFICER IN APPLYING RULE 8D R.W. S ECTION 14A OF THE ACT. H.V. TRANSMISSIONS LTD. 3 2.3. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US CON TENDS THAT SINCE NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EX EMPT INCOME, NO DISALLOWANCE IS WARRANTED UNDER SEC. 14A R.W. RULE 8D. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE HONBLE B OMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD VS DCIT. , HELD THAT RULE 8D IS NOT RETROSPECTIVE. THEREFORE HE SUBMITS THAT TH E LOWER AUTHORITIES ARE NOT JUSTIFIED IN APPLYING RULE 8D FOR THE ASSES SMENT YEAR 2007- 08. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMI TS THAT SINCE INVESTMENTS ON WHICH EXEMPT INCOME IS RECEIVED HAVE BEEN MADE OUT OF SELF GENERATED FUNDS, NO DISALLOWANCE IS WAR RANTED U/S. 14A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER S UBMITS THAT AS THE PROVISIONS OF RULE 8D HAVE NO APPLICATION, THE DISA LLOWANCE MAY BE RESTRICTED TO 2% OF THE DIVIDEND TREATING THE SAME AS THE EXPENDITURE ATTRIBUTABLE FOR EARNING DIVIDEND INCOME. 3. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FOR THE ASSESSMENT YEAR UND ER CONSIDERATION I.E. ASSESSMENT YEAR 2007-08, THE PROVISIONS OF RUL E 8D HAVE NO APPLICATION AS HELD BY THE JURISDICTIONAL HIGH COUR T IN THE CASE OF GODREJ & BOYCE MFG. CO. IT WAS HELD THAT RULE 8D AP PLIES ONLY PROSPECTIVELY. THEREFORE, WE HOLD THAT PROVISIONS OF RULE 8D HAVE NO APPLICATION FOR ASSESSMENT YEAR 2007-08. HOWEVER, REASONABLE DISALLOWANCE SHOULD BE MADE AND WE DIRECT THE ASSES SING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A AT 2% O F THE DIVIDEND H.V. TRANSMISSIONS LTD. 4 INCOME AS REASONABLE EXPENSES FOR EARNING EXEMPT IN COME. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 5. THE SECOND ISSUE IN THE APPEAL OF THE ASSESSEE I S THAT THE LD. CIT(A) ERRED IN NOT ADJUDICATING REGARDING DEDUCTI ON OF DISALLOWANCE OF EMPLOYEES SEPARATION COST WHICH WAS CLAIMED U/S. 37(1) OF THE ACT. 5.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE BECOMES ACADEMIC IN VIEW OF THE ORDER PASSED U/S. 1 43(3) R.W. SEC. 148 WHEREIN THE LD. CIT(A) HAS GIVEN RELIEF. THUS , THIS GROUND OF THE ASSESSEE IS DISMISSED. 6. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPR ECIATION CLAIMED ON ACTUAL COST OF THE ASSETS AS PER SEC. 43(1) OF T HE I.T. ACT. 6.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL FOR THE ASSESSMENT YEA R 2008-09 IN ITA NO. 8324/M/2011 DATED 18.5.2016 AND PLEADS THAT THE SAME MAY BE FOLLOWED. 6.2. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTS T HE ORDERS OF THE AUTHORITIES BELOW. 6.3. ON A PERUSAL OF THE ORDER OF THE CO-ORDINATE B ENCH, WE FIND THAT THE CO-ORDINATE BENCH CONFIRMED THE ORDER OF THE LD . CIT(A) IN HOLDING THAT THE ASSESSING OFFICER TO TAKE THE COST OF ACQUISITION OF ASSETS ACQUIRED BY IT FROM TATA MOTORS LTD., AT TH E COST AT WHICH THEY HAVE BEEN ACQUIRED I.E. THE ACTUAL CONSIDERATION PA ID BY THE ASSESSEE