JHAWAR COMMODITIES P. LTD, MUMBAI V. ITO 4(2)3), MUMBAI

ITA 1635/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48383 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH BEFORE SHRI R.V.EASWAR (PRESIDENT) & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.1635/MUM/2010 A.Y 2006-07 JHAWAR COMMODITIES PVT. LTD., 285, PRINCESS STREET, C.J.HOUSE, 2 ND FLOOR, MUMBAI 400 002. PAN: AAACJ 8915 G VS. THE INCOME TAX OFFICER 4(2)(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. VIJAY MEHTA. RESPONDENT BY : MR. S.K.SINGH. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED OU T OF WHICH GROUND NOS.1 AND 2 WERE NOT PRESSED BEFORE US. THER EFORE, SAME ARE DISMISSED AS NOT PRESSED. THE OTHER GROUNDS ARE AS UNDER: 3. THE LEARNED CIT[A] HAS ERRED IN LAW IN FACT IN CONFIRMING THE ADDITION OF ASSESSING OFFICER TOWARDS DISALLOWANCE A SUM OF ` `` ` .3,38,404/- AS PER RULE 8D OF FINANCE ACT, 2008 U/S .14A OF THE ACT. 3. THE LEARNED CIT[A] HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE LEVY OF INTEREST U/S.234A, 234B, 234C OF THE INCOME TAX ACT, AND NOT ALLOWING STT. 2. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED TH AT ASSESSEE HAD RECEIVED DIVIDEND INCOME OF ` `` ` .20,70,093/-. THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE WHY EXPENDITURE RELATING TO THIS EXEMPT DIVIDEND INCOME SHOULD NOT BE ALLOWED. IN RESPONSE, ASSESSEE GAVE THE FOLLOWING REPLY VIDE LETTER DATED 23-6-2008: 2 DIVIDEND INCOME RECEIVED AGAINST INVESTMENT MADE I N EARLIER YEARS 2001-02 AND 2002-03 IN OUR PROMOTER GROUP COMPANY D HANLAXMI FABRICS LTD. WE WOULD LIKE TO INFORM YOU THAT WE HA D RECEIVED MAJOR DIVIDEND FROM THEM I.E. AMOUNTING TO ` `` ` .20,40,424 ONLY ONE TIME IN THE YEAR. THIS INVESTMENT IS MADE FROM OUR OWN FUNDS SO THERE ARE NO EXPENSES INCURRED EXCEPT A BUS FARE TO DEPOSIT THE CHEQUE IN THE BANK. THE ASSESSING OFFICER AFTER CONSIDERING THE ABOVE, INVOKED RULE 8D IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL AT MUMBAI IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. & ORS. (2008) 119 TTJ (MUM) (S.B) 289 IN ITA NO.8057/M/03 & ORS. DATED 20 TH OCTOBER, 08. HE FURTHER FOUND THAT INTEREST EXPENDITURE WAS NIL. HOWEVER, HE DISALLOWED % OF THE AVERAGE INVESTMENT AS EXPENDIT URE NOT ALLOWABLE U/S.14A. ON APPEAL, ACTION OF THE ASSESSI NG OFFICER WAS CONFIRMED. 3. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO.LTD. VS. DCIT [43 DTR 171] HAS ALREADY HELD THAT RULE 8D HAS NO RETROSPECTIVE APPLICATION AND, THEREFORE, SAME COUL D NOT BE APPLIED FOR A.Y 2006-07 I.E. THE YEAR BEFORE US. 4. ON THE OTHER HAND, LD. DR SUBMITTED THAT IN ANY CASE REASONABLE DISALLOWANCE HAS TO BE MADE IN THE LIGHT OF THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO.LTD. VS. DCIT [SUPRA]. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO.LTD. VS. DCIT [SUPRA], HAS CLEARLY HELD THAT RULE 8D WILL HA VE NO RETROSPECTIVE 3 APPLICATION WHICH MEANS THAT THIS RULE COULD NOT BE APPLIED IN THE ASSESSMENT YEAR 2006-07 I.E. THE YEAR BEFORE US. AT THE SAME TIME, THE HON'BLE HIGH COURT HAS HELD THAT ONLY REASONABLE DI SALLOWANCE CAN BE MADE IN RESPECT OF THE EXPENDITURE. THEREFORE, WE S ET ASIDE THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO MAKE A REASONABLE DISALLOWANCE OF EXPE NDITURE U/S.14A IN THE LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT [SUPRA]. 6. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT ISSU E REGARDING LEVY OF INTEREST U/S.234A, 234B AND 234C IS OF CONSEQUENTIAL NATURE AND, THEREFORE, ASSESSING OFFICER IS DIRECTE D TO LEVY THE INTEREST IN ACCORDANCE WITH THE LAW. SIMILARLY, THE ISSUE RE GARDING CREDIT OF STT REBATE U/S.88E IS ALSO OF CONSEQUENTIAL NATURE AND ASSESSING OFFICER IS DIRECTED TO ALLOW THE CREDIT AS PER SEC.88E. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 15/4/2011. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) PRESIDENT ACCOUNTANT MEMBER MUMBAI: 15/4/2011. P/-* 4