UNIQUE SECURITIES, MUMBAI V. ASST. C.I.T. CIRCLE 4(1), MUMBAI

ITA 1634/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75186 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KETAN DAMANI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI BEFORE SHRI I.P.BANSAL & SHRI D.KARUNAKARA RAO, AM ITA NO. 1634 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 7 - 08 ) UNIQUE SECURITIES, 8, CHANDANBALA CO - OP HSG. SOCIETY , PLOT NO.61, ROAD NO. 25 - C, SION(W), MUMBAI - 22 VS. ACIT, CIR.4(1), MUMBAI - 20 PAN/GIR NO. : A A A F U 0811 B ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. KETAN DAMANI /REVENUE BY : MR . RAVI PRAKASH DATE OF HEARING : 2 ND JANUARY , 201 4 DATE OF PRONOUNCEMENT : 2 ND JANUARY , 201 4 O R D E R PER I.P.BANSAL ( J .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER DATED 6 - 1 - 2011 , PASSED BY THE LEARNED CIT (A) - 8, MUMBAI FOR THE ASSESSMENT YEAR 200 7 - 08 . 2 . THE ASSESSEE IN ITS APP EAL HAS RAISED THE FOLLOWING GROUNDS: - I. DISALLOWED U/S. 14A A. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE U/S 14A OF THE INCOME TAX ACT ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EARN EXEMPTED INCOME. B . YOUR APPELLANT SUBMITS THAT LOOKING TO THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO CONSIDER WRITTEN SUBMISSION MADE BY ASSESSEE, DIRECT NEXUS TO EARN TAX FREE ITA NO. 1634 /20 1 1 2 INCOME AND ORDER IS BASED ON PRE SUMPTION AND SURMISES AND ACTED WITH PREJUDICE. C. PREJUDICE TO ABOVE, YOUR APPELLANT SUBMIT THAT LOOKING TO THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CALCULATING FORMULA TO DETERMINE QUANTUM OF THE EXPENSES INCURRED TO EARN EXEMPTED INCOME. D. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS NOT TO DISALLOWED EXPENSES U/S. 14A OF I.T.ACT AND INCOME BE REDUCED ACCORDINGLY. 3 . A SUM OF RS. 73,911/ - WAS DISALLOWED BY THE AO UNDER THE PROVISIONS SECTI ON 14A ON ACCOUNT OF EXEMPTED DIVIDEND INCOME OF RS. 21,520/ - . THE CALCULATION OF THE DISALLOWANCE WAS MADE UNDER RULE 8D. LEARNED CIT(A) REFERRING TO THE DECISION OF THE HON BE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, REPORTE D IN (2010) 328 ITR 81(BOM) , HAS HELD THAT RULE 8D COULD NOT BE APPLIED AND HE HAS GIVEN A FORMULA AND DIRECTED THE AO TO COMPUTE THE DISALLOWANCE ACCORDING TO THE FORMULA. THE RELEVANT OBSERVATIONS OF THE LEARNED CIT(A) IN THIS REGARD ARE AS UNDER : - TH E ASSESSEE HAD NOT SEPARATELY MAINTAINED THE DETAILS OF EXPENSES INCURRED FOR UNDERTAKING TRANSACTIONS WHICH HAD YIELDED DIVIDEND AND CAPITAL GAIN INCOME WHICH WAS CLAIMED AS EXEMPT. IN VIEW OF THIS, A REASONABLE BASIS OR METHODOLOGY HAS TO BE ADOPTED TO A SCERTAIN THE QUANTUM OF SUCH EXPENDITURE WHICH RELATES TO EARNING OF THE EXEMPT INCOME TO ENFORCE THE PROVISIONS OF SECTION 14A, AS HAS BEEN DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MIS GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA). I FIND T HAT IT WILL BE REASONABLE TO DETERMINE THE QUANTUM OF THE AMOUNT OF EXPENDITURE INCURRED FOR EARNING OF EXEMPTED INCOME AT THE RATIO OF THE TOTAL EXPENDITURE DEBITED TO P & L ACCOUNT IN PROPORTION THAT THE VALUE OF TRANSACTION IN SHARES WHICH HAS YIELDED E XEMPT INCOME BEARS TO THE VALUE OF TOTAL TRANSACTIONS IN SHARE AS UNDER - AMOUNT OF EXPENDITURE ALLOW ABLE TO EARNING OF EXEMPT INCOME = TOTAL EXPENDITURE DEBITED TO P&L A/C (DIRECT & INDIRECT) X VALUE OF TRANSACTION IN SHARE YIELDING EXEMPT INCOME VALUE OF TOTAL TRANSACTIONS IN SHARE. ITA NO. 1634 /20 1 1 3 THE AMOUNTS SO DETERMINED SHALL BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A, BEING EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME. THE A.O. IS DIRECTED TO DETERMINE THE QUANTUM OF SUCH EXPENDITURE BY APPLYING THE RATIO AS MENTIONED ABOVE AND DISALLOW THE SAME AS PER THE PROVISIONS OF SECTION 14A. THE APPEAL ON THIS GROUND IS ACCORDINGLY, DISPOSED OFF WITH THESE DIRECTIONS. THE DISALLOWANCE MADE BY THE A.O. BY APPLYING RULE 8D AT RS. 2,62,323/ - IS THUS, DELETED IN RESPECTFUL COMPLIANCE OF THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF M/ S GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA). THE APPEAL ON THIS GROUND IS TREATED AS PARTLY ALLOWED, FOR STATISTICAL PURPOSE. 4 . IT WAS SUBMITTED BY THE LEARNED A R THAT IF THE EFFECT OF AFOREMENTIONED DECISION IS GIVEN , THEN THERE WILL BE NO DISALLOWANCE. HE SUBMITTED THAT THE AO IS NOT GIVING EFFECT TO SUCH DIRECTION OF THE LEARNED CIT(A) ON THE GROUND THAT THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED BY CIT(A) FO R STATISTICAL PURPOSES. HE, THEREFORE, SUBMITTED THAT APPROPRIATE DIRECTION S MAY BE GIVEN TO THE AO. 5. ON THE OTHER HAND, LEARNED DR RELIEF UPON THE ORDER PASSED BY THE AO. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES. IN OUR OPI NION, APPROPRIATE RELIEF HAS ALREADY BEEN GIVEN BY THE LEARNED CIT(A). IN VIEW OF THE PLEADINGS OF THE LEARNED AR, WE CONSIDER IT JUST AND PROPER TO DIRECT THE ASSESSEE TO FURNISH A CALCULATION OF DISALLOWANCE IN ACCORDANCE WITH THE FORMULA LAID DOWN BY TH E LEARNED CIT(A). AFTER VERIFICATION OF THE SAID CALCULATION, THE AO MAY GIVE EFFECT TO THE ORDER OF THE CIT(A). WE ORDER ACCORDINGLY. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAI D . ITA NO. 1634 /20 1 1 4 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND JANUARY . 201 4 . 2 ND JAN,2014 SD/ - SD/ - ( ) ( D.KARU NAKARA RAO ) ( ) ( I.P.BANSAL ) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI ; DATED 02 / 01/2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBA I 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//