POLYCHEM LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 1724/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1948 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2014
• Court: TRIBUNAL
• Department Lawyers: SIDDARAMAPPA KAPPATTANAVAR
• Assessee Lawyers: NITESH JOSHI MR HITESH TRIVED
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A. NO. 1724/M/2014 (ASSESSMENT YEAR : 2010 - 2011 ) POLYCHEM LIMITED, ORIENTAL HOUSE, 4 TH FLOOR, 7, J. TATA ROAD, CHURCHGATE, MUMBAI - 400 020. / VS. DCIT - 1(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. ./ PAN : A AACP7184M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NITESH JOSHI, MR HITESH TRIVED / RESPONDENT BY : SHRI SIDDARAMAPPA KAPPATTA NAVAR, DR / DATE OF HEARING : 10 .12.2015 / DATE OF PRONOUNCEMENT : 18 .12.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE 12.3.2014 IS AGAINST THE ORDER OF THE CIT (A) - 2, MUMBAI DATED 19.12.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS RAISED IN TH IS APPEAL AND SUBMITTED THAT THE SOLITARY ISSUE RAISED IN THE GROUNDS RELATES TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A R.W. RULE 8D OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE AO QUANTIFIED THE DISALLOWANCE AS P ER THE SAID RULE 8D AT RS. 1,62,296/ - AND MENTIONED THAT THE QUANTIFYING SUCH HUGE DISALLOWANCE IS UNFAIR WHEN THE EXEMPT INCOME IS ONLY RS. 24,430/ - . IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE UNDER THE SAID PROVISIONS MAY NOT EXCEED THE EXEMPT INCOME AND RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT LTD VS. CIT IN ITA NO. 117 OF 2015, DATED 25.2.2015. WITHOUT PREJUDICE, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE DISALLO WANCE UNDER CLAUSE - (III) OF RULE 8D(2) OF THE IT RULES, 1962 MAY NOT EXCEED RS. 68,527/ - . IN 2 SUPPORT OF THE SAID CALCULATIONS, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO SCHEDULE - 5 AND MENTIONED THAT THE INVESTMENT IN GROWTH ORIENTED MUTUAL FUNDS ARE REQUIRED TO BE ADJUSTED FOR THE PURPOSE OF APPLYING THE SAID CLAUSE - (III) OF RULE 8D(2) OF THE IT RULES. 3. AFTER HEARING BOTH THE PARTIES, WE FIND MERIT IN THE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE. WE ACCORD INGLY DIRECT THE AO TO APPLY THE CITED DECISIONS ON THIS SUBJECT AND GRANT RELIEF AFTER VERIFYING THE FACTS. AO SHALL EXAMINE THE FACTS AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE PROTANTO. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOU NCED IN THE OPEN COURT ON 1 8 T H DECEMBER, 2015. S D / - S D / - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 8 /12/2015 . . ./ 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, MUMBA