DCIT, CHENNAI V. Ambadi Enterprises Ltd., CHENNAI

ITA 1574/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7137 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2014
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: M KARUNAKARAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI . . . , !' , # $! % BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1574/MDS/2014 / ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1), CHENNAI 600 034 ( '& /APPELLANT) VS M/S.AMBADI ENTERPRISES LTD., PARRY HOUSE, 5 TH FLOOR, 43 MOORE STREET, CHENNAI-600 001 [PAN: AAACA 6374 J] ( '('& /RESPONDENT) REVENUE BY : SHRI S.DAS GUPTA , JCIT ASSESSEE BY : SHRI M.KARUNAKARAN, ADVOCATE / DATE OF HEARING : 04-09-2014 / DATE OF PRONOUNCEMENT : 23-09-2014 $) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, CHENN AI DATED 26-02-2014 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APPEAL IS RESTRICTING OF DIS-ALLOWANCE U/S.14A R.W.RULE 8D TO 5% OF THE GROS S DIVIDEND RECEIVED BY THE ASSESSEE. 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF EXPORT OF FABRICS AND CARPETS. THE ASSESSEE FIL ED ITS RETURN OF I.T.A. NO. 1574/MDS/2014 2 INCOME FOR THE AY.2006-07 ON 30-11-2006 DECLARING L OSS OF ` 54,723/-. THE CASE OF THE ASSESSEE WAS SELECTED FO R SCRUTINY AND NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HER EIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSE E ON 05-10-2007. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE DIS-ALLOWANCE IN THE IN COME RETURNED BY THE ASSESSEE ON VARIOUS COUNTS, INCLUDI NG DIS- ALLOWANCE U/S.14A. THE ASSESSEE RECEIVED DIVIDEND OF ` 1,12,23,780/- DURING THE AY UNDER CONSIDERATION. T HE ASSESSEE DID NOT MAKE ANY DIS-ALLOWANCE U/S.14A FOR EARNING EXEMPT DIVIDEND INCOME. THE ASSESSING OFFICER APPLIED THE PROVISIONS OF RULE 8D AND MADE DIS-ALLOWANCE TO THE TUNE OF ` 41,40,333/- U/S.14A. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 28-11- 2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS). THE CIT(APPEALS) FOLLOWED THE ORDER OF HON'BLE BOMBAY H IGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LIMITED VS. DCIT REPORTED AS 328 ITR 81 WITH RESPECT TO APPLICABILITY OF RULE 8D. THE CIT(APPEALS) ACCORDINGLY HELD THAT PROVISIONS OF RU LE 8D ARE NOT APPLICABLE IN AY.2006-07. THE CIT(APPEALS) ESTIMAT ED DIS-ALLOWANCE AT 5% OF THE GROSS DIVIDEND RECEIVED IN ACCORDANCE WITH THE DECISION OF THE CO-ORDINATE BENCH OF TRIBU NAL IN CASE OF I.T.A. NO. 1574/MDS/2014 3 M/S.CELEBRITY FASHIONS IN ITA NOS.1318 & 1319/MDS/2011 DECIDED ON 30 TH APRIL, 2012. NOW, THE REVENUE HAS COME IN APPEAL IMPUGNING THE FINDINGS OF CIT(APPEALS). 3. BOTH SIDES HEARD. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S.CELEBRITY FASHIONS (SUPRA) HAS HELD THAT IN PERIOD PRIOR TO APPLICATION OF RULE 8D, REASONABLE DIS-ALL OWANCE U/S.14A CAN BE MADE AND DIS-ALLOWANCE OF 5% OF DIVIDEND INC OME IS REASONABLE. IN THE FACTS OF THE PRESENT CASE, WE ARE SATISFIED THAT 5% OF THE GROSS DIVIDEND IS A REASONABLE DIS-ALLOW ANCE. WE DO NOT FIND ANY ERROR IN THE ESTIMATION MADE BY THE CI T(APPEALS) FOR MAKING DIS-ALLOWANCE U/S.14A. THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON TUESDAY, THE 23 RD SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( !' ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! / JUDICIAL MEMBER '# /CHENNAI, $ /DATED: 23 RD SEPTEMBER, 2014 TNMM #% & '( )#( /COPY TO: 1. *+ /APPELLANT 2. &,*+ /RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. (01 & 2 /DR 6. 13 4 /GF