TATA HOUSING DEVELOPMENT CO. LTD ( FORMERLY KNOWN AS THDC LTD), MUMBAI V. DCIT CIR 7(3), MUMBAI

ITA 1389/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4182 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 08-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: INDIRA G ANAND
• Keywords: Opportunity of being heard; Earning of tax free income; Reasonable cause
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . !' , # $ BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLA IYA, AM . / ITA NO.1389/MUM/2012 % % % % / ASSESSMENT YEAR 2006-07 TATA HOUSING DEVELOPMENT CO. LTD., (FORMERLY KNWN AS THDC LTD.), TIMES TOWERS, 12 TH FLOOR, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. / VS. THE DCIT, CIR.7(3), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. & # ./ '( ./ PAN/GIR NO. : AAACT 0191Q ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: MS. INDIRA G. ANAND *+&) - , / RESPONDENT BY : SHRI RAJENDRA KUMAR - .# / DATE OF HEARING : 08/07/2013 /0% - .# / DATE OF PRONOUNCEMENT : 08/07/2013 1 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER DATED 29/11/2011 PASSED BY LD. CIT(A)-18, MUMBAI FO R THE ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: 1.I) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) GROSSLY ERRED IN UPHOLDING THE ADDITION OF RS.10,93,404/- MADE BY ASSESSING OF FICER (FOLLOWING RULE 8D) U/S. 14A OF THE INCOME TAX ACT, 1961 ON THE GROUNDS THAT NEXUS REQUIREMENT WAS NOT A PREREQUISITE FOR DISALLOWANCE U/S. 14A OF THE INCOM E TAX ACT, 1961. II) HE ERRED IN CONFIRMING A DISALLOWANCE OF RS. 10 ,93,404/- U/S. 14A OF THE INCOME TAX ACT, 1961 FOR EARNING EXEMPT DIVIDEND INCOME OF RS. 1,14,860/-. . / ITA NO.1389/MUM/2012 % % % % / ASSESSMENT YEAR 2006-07 2 III) IN CONFIRMING THE ADDITION OF RS. 10,93,404/- MADE BY ASSESSING OFFICER U/S. 14 A OF THE INCOME TAX ACT, 1961, THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) ERRED IN A. CONFIRMING DISALLOWANCE OF RS.8,85,956!- AS INTE REST COST TO EARN DIVIDEND INCOME WITHOUT APPRECIATING THAT THE APPELLANT HAS SPECIFI C BUSINESS RELATED BORROWINGS AND AS SUCH THERE WAS NO NEXUS BETWEEN INTEREST PAI D AND INVESTMENT YIELDING EXEMPT INCOME. B. CONFIRMING DISALLOWANCES OF RS.2,07,448/- AS VAR IABLE COST TO EARN EXEMPT INCOME WITHOUT APPRECIATING THAT THERE WAS NO NEXUS BETWEEN THE EXEMPT INCOME EARNED AND THE EXPENDITURE INCURRED 2. THIS APPEAL IS TIME BARRED BY ONE DAY. AN APPLI CATION FOR CONDONATION OF DAY HAS BEEN FILED STATING THAT C.AS EMPLOYEES WAS RESPON SIBLE FOR CALCULATING THE NUMBER OF DAYS AND DUE TO ERROR ON HIS PART THERE IS DELAY OF ONE DAY IN FILING THE APPEAL. TO SUPPORT THIS AN AFFIDAVIT FROM THE CHARTERED ACCOU NTANT HAS ALSO BEEN FILED. 3. AFTER HEARING BOTH THE PARTIES WE CONDONE THE DE LAY AS WE ARE SATISFIED THAT THE SAME IS SUPPORTED BY REASONABLE CAUSE. 4. THE A.O COMPUTED THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) R.W.R. 8D AT A SUM OF RS.10,93,404/- . THE SAID DISALLOWANCE WAS AGITATED IN AN APPEAL FILED BY THE LD. CIT(A). LD. CIT(A) H AS DIRECTED THE AO TO ADOPT CERTAIN FORMULA TO COMPUTE THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED APPEAL. 5. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT SI MILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF IN RESPECT OF ASSESSMENT YEAR 2000-01, WHEREIN DISALLOWANCE WAS MADE BY THE AO AT A SUM OF RS.48.0 0 LACS. LD. CIT(A) HAD RESTRICTED THE SAID DISALLOWANCE TO 5% OF TOTAL INVESTMENT OF RS.3,06,91,200/-. ACCORDINGLY, THE ADDITION OF RS.15,34,560/- WAS UPHELD FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT, 328 ITR 81 (BOM) IN ITA NO.2667/MUM/2004 ORDER DATED 30/9/2004. THE MATT ER WAS RESTORED TO THE FILE OF AO WITH THE FOLLOWING OBSERVATIONS: 9. AFTER HEARING BOTH SIDES, WE FIND THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE & MFG. CO. LTD. VS. DC1T VIDE ITA N O.626/MUM/2010 HAS HELD THAT . / ITA NO.1389/MUM/2012 % % % % / ASSESSMENT YEAR 2006-07 3 THE PROVISIONS OF RULE 8D OF THE LT. RULES, WHICH H AS BEEN NOTIFIED W.E.F. 24-03- 2008, SHALL APPLY WITH EFFECT FROM THE ASSTT. YEAR 2008-09. IN THE SAID DECISION, IT HAS FURTHER BEEN HELD THAT EVEN PRIOR TO ASSTT. YEA R 2008-09, WHEN RULE SD WAS NOT APPLICABLE, THE AO HAS TO ENFORCE THE PROVISIONS OF SUBSECTION (1) OF SEC. 14A. FOR THAT PURPOSE, THE 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 RECORD. S INCE THE DECISION OF THE JURISDICTIONAL HIGH COURT WAS NOT AVAILABLE BEFORE THE CIT(A), THEREFORE, WE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF THE JU RISDICTIONAL HIGH COURT. THE AO SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT AC CORDINGLY. THIS GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. THUS IT WAS PLEADED BY LD. A.R THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO WITH THE SIMILAR DIRECTIONS. 6. ON THE OTHER HAND, LD. D.R RELIED UPON THE ORDER PASSED BY LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. RESPECTFULLY FOLLOWING THE AFOREMENT IONED DECISION OF TRIBUNAL IN ASSESSEES OWN CASE WE RESTORE THIS ISSUE TO THE F ILE OF AO FOR RE-ADJUDICATION AS PER DIRECTIONS GIVEN IN RESPECT OF ASSESSMENT YEAR 2000-01. 8. IN THE RESULT, FOR STATISTICAL PURPOSES THE APPE AL FIELD BY THE ASSESSEE IS TREATED AS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 08/07/2013 1 - /0% # 3 45 08/07/2013 0 - 6 7 SD/- SD/- ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED 08/07/2013 . / ITA NO.1389/MUM/2012 % % % % / ASSESSMENT YEAR 2006-07 4 1 1 1 1 - -- - *.89 *.89 *.89 *.89 :9%. :9%. :9%. :9%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9<6 *. , , / DR, ITAT, MUMBAI 6. 6= > / GUARD FILE. 1 1 1 1 / BY ORDER, +9. *. //TRUE COPY// ? ?? ? / @ @ @ @ ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS