AMEER TRADING CORPORATION LIMITED, MUMBAI V. ACIT 2(1), MUMBAI

ITA 1442/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75555 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 18-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: BHAVIK SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.1442/M/2011 ( / ASSESSMENT YEAR: 2007 - 2008 ) AMEER TRADING CORPORATION LIMITED, 310B, VEER SAVARKAR MARG, DADAR (W), MUMBAI 28. / VS. ACIT 2(1), AAYAKAR BHAVAN, MUMBAI 20. ./ PAN : AABCA 0761 A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MILIN DATTANI & MR. BHAVIK SHAH / RESPONDENT BY : SHRI O.P. SINGH, DR / DATE OF HEARING : 18.2.2014 / DATE OF PRONOUNCEMENT : 18.2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 18.2.2011 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 22.12.2010 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING EXPENSES AMOUNTING TO RS. 4,72,016/ - U/S 14A READ WITH RULE 8D. 2. THE LD CIT (A) FAILED TO APPRECIATE THAT THE PROVISIONS OF RULE 8D WERE APPLICABLE ONLY FROM THE AY 2008 - 2009 AND COULD NOT THEREFORE BE HELD TO APPLY RETROSPECTIVELY. 3. THE LD CIT (A) FAILED TO APPRECIATE THE FACT THAT THE TOTAL DISALLOWANCE OF RS. 4,72,016/ - MADE BY THE AO WAS EXCESSIVE HAVING REGARD TO THE FACT THAT THE APPELLANT HAD EARNED DIVIDEND INCOME OF ONLY RS. 1,304/ - . 3. THE ONLY ISSUE EMANATING FROM THE ABOVE GROUNDS IS THE DISALLOWANCE OF RS. 4,72,016/ - U/S 14A READ WITH RULE 8D MADE BY THE AO AN D CONFIRMED BY THE CIT (A). AT THE OUTSET, SHRI MILIN DATTANI & MR. BHAVIK SHAH, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 9 34 OF 2 2011, DATED 8.1.2013 AND MENTIONED THAT THE IN VIEW OF THE ABOVE MENTIONED JUDGMENT OF THE, THE ITAT HAS TAKEN THE VIEW THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO 2% OF THE DIVIDEND INCOME. LD COUNSEL ALSO RELIED ON THE DECISION OF THE TR IBUNAL IN THE CASE OF M/S. INSYS HOLDINGS PRIVATE LIMITED VS. DCIT VIDE ITA NO. 522 & 523/M/2011 , DATED 6.12.2013, WHEREIN ONE OF US (AM) IS A PARTY, AND MENTIONED THAT VIDE PARA 6 TO 8, THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYI NG ON THE DECISION OF THE SAID HONBLE HIGH COURT JUDGMENT IN THE CASE OF GODREJ AGROVET (SUPRA). 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. IT IS A FACT THAT THE RELEVANT ASSESSMENT YEAR IS 2007 - 08 UNDER CONSIDERATION IS OUTSIDE THE SCOPE OF PROVISIONS OF RULE 8D. THE SAID PROVISIONS CANNOT BE TREATED AS APPLICABLE TO THE A.Y.2007 - 08 UNDER CONSIDERATION INDIRECTLY WHEN THE SAME IS PRECLUDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, REPORTED IN (2010) 328 ITR 81(BOM) . THE HONBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 , HAS HELD THAT PERCENTAGE OF THE EXEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLOWANCE IN THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008 - 09. THE RELEVANT PORTION OF THE SAID JUDGMENT OF THE BOMBAY HIGH COURT (SUPRA) READS AS UNDER: '4. SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNAL IN ITS IMPUGNED ORDER DATED 17.9.2010 WHILE APPLYING THE DECISION OF THIS COURT IN THE MATTER OF GODREJ (SUPRA) HAS DISALLOWED THE EXPENDITURE ONLY TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE RESPON DENT - ASSESSEE ON THE BASIS ITS ORDER DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2002 - 2003 AND ORDER DATED 10.9.2009 FOR THE ASSESSMENT YEARS 2003 - 2004 AND 2004 - 2005 WHEREIN DISALLOWANCE WAS RESTRICTED TO 2% OF THE EXEMPT INCOME. FURTHER; THE TRIBUNAL HAS REMA NDED THE MATTER TO THE AO TO VERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL. ' 6. FURTHER , WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL DATED 6.12.2013 IN THE CASE OF M/S. INSYS HOLDINGS PRIVATE LIMITED (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT THE TRIBUNAL HAS ADJUDICATED THE ISSUE UNDER CONSIDERATION BY RELYING ON THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AGROVET (SUPRA) AND PARA 6 - 8 ARE RELEVANT IN THIS REGARD . 3 THEREFORE, CONSIDERING AND THE BINDING NATURE OF THE HONBLE HIGH COURTS JUDGMENT , WE REMIT THE ISSUE TO THE FILES OF THE AO AND DIRECT THE AO TO QUANTIFY THE DISALLOWANCE IN THE LIGHT OF THE AFORESAID JUDGMENTS OF THE HONBLE HIGH COURT . ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2014. S D / - S D / - (SANJAY GARG ) (D. KARUNAKARA RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 18.2.2014 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBA