TRAVOTEL (I) P. LTD, MUMBAI V. ITO WD 2(3)3, MUMBAI

ITA 1552/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4089 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 19-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2011
• Court: TRIBUNAL
• Department Lawyers: A N SONTAKKE
• Assessee Lawyers: K K VED; J D MISTRI
• Keywords: Business expenditure; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ./I.T.A. NO. 1552/M/2011 ( AY: 2005 - 2006 ) ./I.T.A. NO.1553/M/2011 ( AY: 2006 - 2007 ) TRAVOTEL (INDIA) PVT LTD., C/O. TAJ PRINTING WORKS, 46/A, CAWASJI PATEL STREET, FORT, MUMBAI 400 001. / VS. ITO, WARD - 2(3)3, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020. ./ PAN : AAACT1982D ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI J.D. MISTRI & MR. K.K. VED / REVENUE BY : SHRI A.N. SONTAKKE, DR / DATE OF HEARING : 25.04.2016 / DATE OF PRONOUNCEMENT : 25.04.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 6, MUMBAI DATED 10.12.2010 FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. SINCE, THE ISSUES RAISED IN BOTH THESE APPEALS ARE IDENTICAL, THE ONLY DIFFERENCE IS IN FIGURES, AND THEREFORE, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN T HE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. FIRSTLY , WE SHALL TAKE UP THE APPEAL ITA NO.1552/M/2011 FOR THE AY 2005 - 2006. IN THIS APPEAL, ASSESSEE RAISED THREE GROUNDS IN TOTO. GROUND NO.1 RELATES TO DISALLOWANCE OF EXPENSES ON THE GROUND THAT THE ASSESSEE WAS NOT ENGAGED IN ANY BUSINESS DURING THE YE AR; GROUND NO.2 RELATES TO COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST THE ASSESSEES TREATMENT OF PROFITS OR GRAINS OF BUSINESS OR PROFESSION AND GROUND NO.3 RELATES TO THE DISA LLOWANCE U/S 14A OF THE ACT. THESE ISSUES ARE COMMON TO THE OTHER APPEAL ITA NO.1553/M/2011 RAISED BY THE ASSESSEE FOR THE AY 2006 - 07. 2 3 . AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THERE IS A DISPUTE ON AN ISSUE RELATING TO THE HEAD OF INC OME QUA THE ALLOWABILITY OF EXPENSES. SO FAR AS THE HEAD OF INCOME ISSUE IS CONCERNED, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT AN IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL. IN SUPPORT OF THE SAME, HE FILED A COPY OF THE ORDER OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR AY 2001 - 2002 IN ITA NO.3218/M/2006, DATED 19.3.2009. FURTHER, LD COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE ISSUE RAISED IN GROUND NOS. 1 HAS TO BE DECIDED IN LINE WITH THE RATIO LAID DOWN BY THE TRIBUNAL VIDE ITS ORDER DATED 19.3.2009 (SUPRA). HE ALSO MENTIONED THAT GROUND NO.2 BECOMES INFRUCTUOUS, IF THE EXPENSES ARE ALLOWED AS BUSINESS EXPENSES, WHICH IS A LIKELY OUTCOME IF THE SAID ORDER OF THE TRIBUNAL BY THE AO. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE S AID ORDER OF THE TRIBUNAL (SUPRA) DATED 19.3.2009, WE REMAND GROUND NOS. 1 AND 2 TO THE FILE OF THE AO FOR APPROPRIATE DECISION AFTER FOLLOWING STRICTLY THE RATIO LAID DOWN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2001 - 2002 (SUPRA). ACCORDING LY WE ORDER. 5. GROUND NO.3 RELATES TO DISALLOWANCE U/S 14A OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE ASSESSMENT YEARS UNDER CONSIDERATION BE ING THE ONES PRIOR TO THE AMENDMENT TO RULE 8D OF THE IT RULES, 1962, LD COUNS EL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF THE AO FOR STRICTLY FOLLOWING THE RATIO LAID DOWN IN THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 O F 2011, DATED 8.1.2013 . 6. 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 TH E 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 3 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 RESPONDENT - 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 TRIB UNAL HAS REMANDED 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. ' 7. CONSIDERING THE BINDING NATURE OF THE JUDGMEN T, WE DIRECT THE AO TO QUANTIFY THE DISALLOWANCE IN THE LIGHT OF THE AFORESAID JUDGMENTS OF THE HONBLE H IGH COURT. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE, IN PRINCIPLE, IS ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 25 TH APRIL, 2016 S D / - S D / - (AMARJIT SINGH) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 25.4.2016 . . ./ 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, MUMBAI