VTM Limited, Virudhunagar V. Addl. CIT, Virudhunagar

ITA 1320/CHNY/2010

• Counselvise Citation: 132021714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N PRAKASH
• Assessee Lawyers: R SRINIVASAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.1320/MDS/2010 (ASSESSMENT YEAR : 2006-07 ) M/S VTM LIMITED SULAKARAI VIRUDHUNAGAR 626 003 VS THE ADDL. CIT VIRUDHUNAGAR RANGE VIRUDHUNAGAR [PAN AAACV3775E ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI T.N.PRAKASH, JCIT DATE OF HEARING : 6-9-2011 DATE OF PRONOUNCEMENT : 4-10-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESSMEN T YEAR 2006-07, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), MA DURAI, DATED 28.6.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSING OFFICER HAS DISALLOWED AN ESTIMATED AMOUNT OF 2% OF THE DIVIDEND ITA 1320/2010 :- 2 -: INCOME AS EXPENSES RELATING TO EXEMPT INCOME U/S 14 A OF THE ACT. BEFORE THE LD. CIT(A) THE ASSESSEES REPRESENTATIVE ARGUED THAT THE ACTUAL EXPENDITURE INCURRED FOR EARNING DIVIDEND IN COME OF ` 46,33,926/- WAS ` 10,041/- BEING THE DEPOSITORY CHARGES PAID TO ABN AMRO BANK FOR DEMAT ACCOUNT. APART FROM THIS, NO E XPENDITURE WAS INCURRED. IN EARLIER YEAR, THE BENCH HAS REMITTED BACK SIMILAR ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE ACT UAL EXPENDITURE INCURRED FOR DISALLOWANCE U/S 14A AND ON THAT GROUN D, HE SUBMITTED THAT THERE IS NO JUSTIFICATION TO DISALLOW AN ESTIM ATED AMOUNT. BEFORE THE LD. CIT(A) THE LD.AR FILED A WORKING-SHEET FOR DISALLOWANCE IN ACCORDANCE WITH RULE 8D AND ON THE BASIS OF THAT WO RKING, THE AMOUNT COMES TO ` 5,02,385/-. THE AMOUNT COMPUTED UNDER RULE 8D WAS FOUND TO BE MORE THAN THE AMOUNT DISALLOWED BY THE ASSESSING OFFICER. WHEN FURTHER CLARIFICATIONS WERE CALLED FOR, IT WAS SUBMITTED BY THE LD.AR THAT RULE 8D WOULD NOT APPLY TO THE ASSESSMEN T YEAR 2006-07 WHICH IS UNDER CONSIDERATION BECAUSE RULE 8D COMES INTO OPERATION ONLY WITH EFFECT FROM ASSESSMENT YEAR 2007-08. IN THAT WAY, THE LD. CIT(A) HAS ENHANCED THE DISALLOWANCE THAT TOO, WITH OUT GIVING NOTICE TO THE ASSESSEE. ITA 1320/2010 :- 3 -: 3. AFTER HEARING BOTH SIDES ON THIS ISSUE, IT WAS ARGU ED THAT THE ASSESSING OFFICER HAS NOWHERE CAME TO A CONCLUS ION THAT HE WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE THAT N O EXPENDITURE WAS INCURRED IN RELATION TO EARNING THE DIVIDEND INCOME AND HENCE, RULE 8D CANNOT BE INVOKED. REGARDING DEMAT CHARGES OF ` 10,041/- IT WAS ARGUED THAT IN FACT THIS WAS NOT THE EXPENDITURE IN RELATION TO EARNING OF DIVIDEND INCOME BUT ONLY FOR KEEPING HT DEMAT AC COUNT BY THE DEPOSITORY AND SO NO EXPENDITURE IN RELATION TO DEM AND ACCOUNT WAS AT ALL INCURRED. WE ARE AWARE THAT IN ORDER TO INVOKE RULE 8D, THERE HAS TO BE SOME NEXUS WITH THE EXPENDITURE AS THE WORDS IN RELATION TO ARE USED AND MECHANICAL APPLICATION OF RULE 8D IS N OT ENVISAGED. CONSEQUENTLY, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL CONSIDER THIS ISSUE AFRESH AFTER GIVING OP PORTUNITY TO THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LD. CIT(A) AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER WITH THE ABOVE DIRECTION. ITA 1320/2010 :- 4 -: 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT O N 4-10-2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 4 TH OCTOBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR