Kirloshar Ebara Pumps Ltd., Pune V. DCIT,Cir.-11(1), Pune

ITA 1458/PUN/2010

• Counselvise Citation: 145824514 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 1458/PN/10 (ASSTT. YEAR: 2006-07) KIRLOSKAR EBARA PUMPS LTD, .. APPELLANT PRIDE KUMAR SENATE BLDG., S.B. ROAD, PUNE PAN AAACK 7293A VS. DY. COMMISSIONER OF INCOME-TAX, .. RESPONDENT CIR. 11(1) PUNE APPELLANT BY : SHRI C H NANIWADEKAR RESPONDENT BY : MS ANN KAPTHUAMA DATE OF HEARING : 21.02.20 12 DATE OF PRONOUNCEMENT : 28.02. 2012 ORDER PER G.S. PANNU, A.M .: IN THIS APPEAL BY THE ASSESSEE, GROUND NO.1 RELATES TO AN ADDITION OF RS 3,03,800/- MADE BY THE ASSESSING OFFICER OUT OF ROYAL TY PAYMENT TO M/S EBARA CORPORATION, JAPAN. 2. AT THE TIME OF HEARING, IT WAS A COMMON GROUND BET WEEN RIVAL PARTIES THAT THE DISPUTE IS IDENTICAL TO THAT CONSIDERED BY THE TRIBUNAL IN ASSESSEES CASE FOR ASSESSMENT YEAR 2004-05 VIDE ITA NO 1073/PN/07 DATED 30.7.2009 WHICH WAS FOLLOWED FOR ASSESSMENT YEAR 2005-06, VIDE ITS O RDER DATED 12.11.2010 IN ITA NO. 796/PN/09. ITA NO 1073/PN/07. ACCORDINGLY, FOLLOWING THE PRECEDENTS, WE DIRECT THE ASSESSING OFFICER TO DELET E THE IMPUGNED ADDITION OF RS 3,03,800/-. THIS GROUND OF APPEAL OF T HE ASSESSEE IS ALLOWED. 3. IN SO FAR AS SECOND GROUND IS CONCERNED, THE SAME RELAT ES TO AN ADDITION OF RS 2,68,185/- MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). IN THIS CONNECTION, IT IS SOUGHT TO BE POINTED OUT THAT TH E ASSESSEE HAD INVESTED AN AMOUNT OF RS 9,70,13,391/- IN TAX FREE ASSETS ON WH ICH EXEMPTED INCOME BY WAY OF DIVIDEND OF RS 2,68,18,469/- HAS BEEN RECEI VED. IN THE RETURN OF INCOME FILED, THE ASSESSEE APPROPRIATED RS 40,000/- AS DI RECT EXPENDITURE ATTRIBUTABLE FOR EARNING THE EXEMPTED INCOME AND DISA LLOWED THE SAME. IN THE DRAFT ASSESSMENT ORDER PROPOSED BY THE ASSESSING OFFICER UND ER SECTION 143(3) READ WITH SECTION 144C/115WE(3) OF THE ACT, HE DISALLOWED A SUM OF RS 2,42,532/- BY INVOKING THE PROVISIONS OF RULE 8-D IF THE INCOME-TAX RULES, 1962 (IN SHORT THE RULES). THE ASSESSEE TOOK UP THE MAT TER BEFORE THE DISPUTE RESOLUTION PANEL (DRP) WHICH, BY ITS ORDER DAT ED 28.1.2010 DIS- AGREED WITH THE ACTION OF THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE BY INVOKING RULE 8-D OF THE RULES FOLLOWING THE JUDGM ENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. MUMBAI VS. DY. CIT 328 ITR 81(BOM) . THE DRP DIRECTED THE ASSESSING OFFICER TO ARRIVE AT THE DISALLOWANCE KEE PING IN VIEW THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT. SUBS EQUENTLY, THE ASSESSING OFFICER, FOLLOWING THE DIRECTIONS OF THE DRP, ESTIMATED THE EXPENDITURE DISALLOWABLE UNDER SECTIO N 14A AT 10% OF THE EXEMPTED INCOME, I.E. RS 2,68,185/- AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT AD HOC ESTIMATION OF EXPENDITURE RELATING TO THE EXEMPTED I NCOME AT 10% IS UNCALLED FOR, ESPECIALLY CONSIDERING THE FACT THAT THE INVESTMENT S HAVE BEEN MADE TOTALLY OUT OF THE CAPITAL RESERVES AND SURPLUSES AND TH ERE IS NO INTEREST ELEMENT INVOLVED. THE ASSESSEE HAD ITSELF MADE A DISALLOW ANCE OF RS 40,000/- ATTRIBUTABLE TO SALARY AND OTHER ADMINISTRATIVE COSTS AN D NO FAULT HAS BEEN FOUND WITH THE CLAIM OF THE ASSESSEE IN THIS REGARD. MOR EOVER, IT IS POINTED OUT THAT AS A RESULT OF ORDER OF THE DRP FINAL DISALLOWANCE MADE BY THE ASSESSING OFFICER IS EVEN HIGHER THAN THE DISALLOWANCE MADE IN THE DRAFT ASSESSMENT ORDER AND TO THAT EXTENT, THE ORDER IS UNJUSTIFIED. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE DEFENDED THE ORDERS OF THE AUTHORITIES BELOW BY PLACING RELIANCE ON THE SAME. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE PRESENT CASE, IN OUR VIEW, THE DRP MADE NO MISTAKE IN NEGATING THE PLEA OF THE ASSESSING OFFICER TO INVOKE RULE 8-D OF THE RULES TO COMPU TE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. MUMBAI V DY. CIT (SUPR A) HAS DIRECTED THAT IN SUCH CIRCUMSTANCES A REASONABLE BA SIS BE ADOPTED TO EFFECT THE APPORTIONMENT. IN OUR VIEW, I N THIS CASE, THE ESTIMATE OF EXPENDITURE ATTRIBUTABLE TO THE EXEMPTE D INCOME HAS BEEN MADE BY THE ASSESSEE, WHICH HAS NOT BEEN FOUND TO BE UNREASONABLE IN ANY MANNER. THE ASSESSING OFFICER H AS PROCEEDED ON A THUMB-RULE BASIS WITHOUT GOING INTO THE REASONS AS TO WHY THE APPORTIONMENT MADE BY THE ASSESSEE IS INCORRECT OR IS UNTENABLE. WE, THEREFORE, DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDE R SECTION 14A OF THE ACT TO A SUM OF RS 40,000/- AS MADE OUT BY T HE ASSESSEE AND TO DELETE THE BALANCE OF THE ADDITION. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF FEBRUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED 28 TH FEBRUARY, 2012 B COPY TO:- 1) KIRLOSKAR EBARA PUMPS LTD. PUNE 2) DCIT CIR. 11(1) PUNE 3) DRP PUNE 4 THE CIT PUNE 5) DR A BENCH, I.T.A.T., PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE