DCIT, Circle-1(1), Hyderabad V. M/s. All Time Projects Ltd, Secunderabad

ITA 1623/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59115 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.1623/HYD/2011 (ASSESSMENT YEAR 2007-08 ) DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. V/S M/S. ALL TIME PROJECTS LTD. SECUNDERABAD (PAN - AACCA 2650 B ) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : NONE DATE OF HEARING 5 1.2012 DATE OF PRONOUNCEMENT 12.1.2012 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A) DATED 4.7.2011 FOR THE ASSESSMENT YEAR 2007-08. 2. EFFECTIVE GROUNDS OF THE REVENUE ARE AS UNDER- 1. 2. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSE SSING OFFICER TO DETERMINE REASONABLE EXPENDITURE DISALLO WABLE U/S. 14A AFTER GIVING OPPORTUNITY TO THE ASSESSEE, WHICH IS NOTHING BUT SET ASIDE OF THE ASSESSMENT, WHICH I S BEYOND THE SCOPE OF POWER AVAILABLE TO THE CIT(A). 3. ON THE BASIS OF THE FACTS AVAILABLE ON RECORD, T HE LEARNED CIT(A) COULD HAVE DETERMINED REASONABLE AMOUNT DISALLOWABLE U/S. 14A OF THE INCOM E-TAX ACT, 1961. 4. THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE DE CISION OF THE APEX COURT IN RAJENDRA PRASAD MOODY 115 ITR 519 (SC) AND DECISION OF KARNATAKA HIGH COURT IN PRADEE PKAR & ACIT (39 ITR 416) AND MADE NECESSARY DISALLOWANCE . ITA NO.1623/HYD/2011 M/S. ALL TIME PROJECTS LTD., SEC UNDERABAD 2 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THEIR RESPONDENT-ASSESSEE. NOT EVEN AN ADJOURNMENT PETIT ION HAS BEEN RECEIVED. HENCE, WE PROCEEDED TO HEAR THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR DISPOSAL OF THE APPEAL EX-PARTE QUA THE ASSESSEE. 4. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESE NTATIVE AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER S.143(3) ON 29.10.2009, DETERMINED THE LOSS OF THE ASSESSEE AT RS.8,01,24,8 43, AS AGAINST LOSS OF RS.8,33,02,787 DECLARED BY THE ASSESSEE, AFTER T REATING PART OF EXPENDITURE MAINLY ADMINISTRATIVE EXPENDITURE, AS R ELATABLE TO EARNING DIVIDEND FROM EQUITY SHARES, WHICH IS EXEMPT UNDER S.10(38) AND CONSEQUENTLY MADE DISALLOWANCE OF AN AMOUNT OF RS.3 1,77,944 UNDER S.14A OF THE ACT. ON APPEAL, THE CIT(A), RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE M FG. CO. LTD. V/S. DY. CIT(328 ITR 81), WHEREIN IT IS HELD THAT RULE 8 D, WHICH HAS BEEN INSERTED BY THE NOTIFICATION NO.S.PO.547(E) DATED 2 4.3.2008 INTO INCOME-TAX RULES, IS APPLICABLE ONLY PROSPECTIVELY AFTER IT WAS NOTIFIED, BUT DOES NOT HAVE RETROSPECTIVE APPLICATION, CONCLU DED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF S.14A READ WITH RULE 8D FOR THE ASSESSMENT YEAR 2007-08 A ND DISALLOWING RS.31,77,944 ON THE GROUND THAT THE ASSESSEE MIGHT HAVE INCURRED EXPENDITURE IN EARNING EXEMPT DIVIDEND INCOME. HE FURTHER OBSERVED THAT SINCE THE ENTIRE AMOUNT OF INVESTMENT AS MADE OUT OF THE RESERVES AND SURPLUS CREATED OUT OF THE LONG TERM C APITAL GAINS ARISEN IN ASSESSMENT YEAR 2006-07, THERE COULD BE NO EXPEN DITURE ON ACCOUNT OF INTEREST IN EARNING EXEMPT INCOME. HE HOWEVER N OTED THAT IT CANNOT BE DENIED THAT THERE WOULD BE SOME AMOUNT OF EXPEND ITURE TO BE INCURRED FOR EARNING THE DIVIDEND INCOME. WITH TH ESE OBSERVATIONS, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER AS FO LLOWS- ITA NO.1623/HYD/2011 M/S. ALL TIME PROJECTS LTD., SEC UNDERABAD 3 HOWEVER, THE AO HAS NOT BROUGHT ON RECORD AS TO W HETHER THE APPELLANT HAD ACTUALLY INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPTED INCOM E. RELYING ON GODREJ BOYCE CITED ABOVE, THE AO HAS DIRECTED TO DETERMINE AS TO WHETHER THE ASSESSE E HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RE LATION TO DIVIDEND INCOME WHICH DOES NOT FORM PART OF THE TOT AL INCOME AS CONTEMPLATED U/S. 14A, BY ADOPTING A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT AFTER GIVING AN OPPORTU NITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMST ANCES OF THE CASE. THE QUESTION INVOLVED IN THIS APPEAL WAS WHETHER TH E ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING IN TERMS OF S.14A READ WITH RULE 8 AN AMOUNT OF RS.31,77,944, TREATING THE SAME AS RELATA BLE TO DIVIDEND INCOME, WHICH IS AN EXEMPT INCOME RECEIVED BY THE A SSESSEE. THE CIT(A) BY OBSERVING ON ONE HAND THAT THERE WOULD BE SOME AMOUNT OF EXPENDITURE TO BE INCURRED FOR EARNING THE DIVIDEND AND ALSO OBSERVING THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD AS TO WHETHER THE APPELLANT HAD ACTUALLY INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPTED INCOME HAS DIRECTED THE ASSESSING OFFICER TO DETERMINE REASONABLE AMOUNT WHICH CAN BE APPORTIONED TO THE D IVIDEND INCOME RECEIVED BY THE ASSESSEE, AFTER GIVING REASONABLE O PPORTUNITY TO THE ASSESSEE AND AFTER CONSIDERING ALL RELEVANT OR GERM ANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. EVEN THOUGH THE CIT(A) OUTRIGHT, HAS NOT GRANTED ANY RELIEF TO THE ASSESSEE, AND AS SUCH, THE REVENUE CANNOT HAVE ANY GRIEVANCE AGAINST THE ORDER OF THE CIT(A), AS POINTED OUT BY THE REVENUE BEFORE US, TH E CIT(A) DOES NOT HAVE POWERS OF SETTING ASIDE A MATTER FOR FRESH CON SIDERATION BY THE ASSESSING OFFICER. AS SUCH, THE ACTION OF THE CIT(A ) IN SETTING ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER CANNOT BE APPROVED, AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) TO THAT EXTENT. HOWEVER, CONSIDERING TOTALITY OF FACTS AND CIRCUMST ANCES OF THE CASE, IT IS NECESSARY TO WORK OUT REASONABLE AMOUNT OF EXPEN SES WHICH ARE ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME, FOR P URPOSES OF DISALLOWANCE IN TERMS OF S.14A OF THE ACT. IN TH E CIRCUMSTANCES, WE ITA NO.1623/HYD/2011 M/S. ALL TIME PROJECTS LTD., SEC UNDERABAD 4 SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND R ESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO BRING ON RECORD RELEVANT MATERIAL AND DETERMINE REASONABLE AMOUNT O F EXPENDITURE ATTRIBUTABLE TO THE EXEMPT INCOME, WHICH COULD BE S UBJECTED TO DISALLOWANCE UNDER S.14A OF THE ACT, AND ACCORDINGL Y REFRAME THE ASSESSMENT IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 12.1.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 12 TH JANUARY, 2012 COPY FORWARDED TO: 1. M/S. ALL TIME PROJECTS LTD. 3 - 6 - 19090/1, BESIDE VIJAYA BANK, BOOSIREDDYGUDA, WEST MARREDPALLY, SECUNDERABAD 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 1(1), HY DERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD 4. COMMISSIONER OF INCOME - TAX I, H YDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S.