TML DRIVELINES LTD, MUMBAI V. ASST CIT 2(1)(2), MUMBAI

ITA 1729/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0325 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: HARI IYER
• Keywords: Opportunity of being heard; Principle of natural justice; Rule of consistency; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 250; 10

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.1729/ MUM/2017 ( / ASSESSMENT YEAR : 2006 - 07) TATA MOTORS LTD., (SUCCESSOR TO TML DRIVELINES LIMITED) BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI - 400001 / V. ACIT 2(1)(2), AAYAKAR BHAWAN MUMBAI 400020 ./ PAN : AAACH7625P ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI HARI IYER REVENUE BY: SHRI. D.G PANSARI (DR) / DATE OF HEARING : 28.01.2019 / DATE OF PRONOUNCEMENT : 29 .03.2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY ASSESSEE, BEING ITA NO. 1729/ MUM/2017 , IS DIRECTED AGAINST APPELLATE ORDER DATED 07.12.2016 IN APPEAL NO. CIT(A) - 3/IT - 46/ACIT - 2(1)(1)/16 - 17, PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR(AY) 2006 - 07 , THE APPELLATE PROCE EDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 31.01.2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) READ WITH SECTION 254 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2006 - 07 . I.T.A. NO.1729/MUM/2017 2 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - THE APPELLANT IS IN RECEIPT OF THE ORDER DATED 07 DECEMBER 2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 3, MUMBAI ['LD. CIT(A)'] UNDER SECTION 250 OF THE INCOME - TAX ACT, 1961 ('THE ACT') IN CONNECTION WITH THE APPEAL FILED BY THE APPELLANT AGAINST THE ORDER DATED 31 JANUARY 2015 PASSED BY THE ASSESSING OFFICER ( 'AO') UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT. THE APPELLANT BEING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) HAS PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS, WHICH ARE WITHOUT PREJUDICE TO EACH OTHER: 1. DISALLOWANCE UNDER S ECTION 14A OF THE ACT : A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE UNDER SECTION 14A OF THE ACT WITHOUT APPRECIATING THE FACT THAT NO EXPENDITURE HAS BEEN INCURRED BY TH E APPELLANT IN RELATION TO EARNING EXEMPT INCOME. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GIVING A FINDING THAT THE APPELLANT FAILED TO POINT OUT MISTAKE IN WORKING OF THE AO INASMUCH THE ARGUMENTS W ERE DULY PLACED ON RECORD AND DELIBERATED, HOWEVER, THE SAME WERE NOT CONSIDERED AND DISCUSSED IN THE ORDER; C) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE UNDER SECTION 14A OF THE ACT THEREBY NOT FOLLOWING TH E DIRECTIONS OF THE HON'BLE ITAT AND DISREGARDING THE WORKING OF DISALLOWANCE AS SUBMITTED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS GIVING THE COMPUTATION OF THE AMOUNT WHICH CAN BE RE ASONABLY ASCRIBED TO THE MANAGEMENT OF INVESTMENTS CAPABLE OF E ARNING EXEMPT INCOME; D) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE EXPENSES CONSIDERED BY THE AO FOR MAKING ADHOC DISALLOWANCE U/S 14A OF THE ACT ARE ACTUALLY INCURRED FOR DAY - TO - DAY ACTIVITIES OF THE BUSINESS AND HAS 'NO PROXIMATE NEXUS WITH EARNING OF EXEMPT INCOME'; I.T.A. NO.1729/MUM/2017 3 E) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRED IN NOT FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL TRIBUNAL IN THE CASE OF ONE OF ITS GROUP CONCERN WHEREIN DISALLOWANCE UNDER SECTION 14A OF THE ACT PRIOR TO AY 2008 - 09 IS RESTRICTED TO TWO PER CENT OF THE DIVIDEND INCOME. 2. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLD ING THE LEVY OF INTEREST UNDER SECTION 234C AS MANDATORY WITHOUT APPRECIATING THE FACTS OF THE CASE. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THERE WAS NO SHORTFALL ON PAYMENT O F ADVANCE TAX DUE ON RETURNED INCOME IN ANY OF THE INSTALMENTS FOR ADVANCE TAX AND HENCE, INTEREST LEVIED UNDER SECTION 234C OF THE ACT AMOUNTING TO RS. 39,48,423/ - OUGHT TO BE DELETED. 3. LEVY OF INTEREST UNDER SECTION 234D OF THE ACT A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THE LEVY OF INTEREST UNDER SECTION 234D AS MANDATORY WITHOUT APPRECIATING THE FACTS OF THE CASE AND ADJUDICATING THE ISSUE ON MERITS. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT LEVY OF INTEREST UNDER SECTION 234D IS CONSEQUENTIAL IN NATURE AND NOT MANDATORY. THE APPELLATE CRAVES LEAVE TO ADD TO, ALTER, DELETE OR SUBSTITUTE ALL OR ANY OF THE A FORESAID GROUND OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THIS IS SECOND ROUND OF LITIGATION AND IN T HE FIRST ROUND OF LITIGATION AN ADDITION OF RS. 29,41,000/ - ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME WAS MADE BY INVOKING PROVISIONS OF SECTION 14A OF THE 1961 ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 . THE ASSESSEE HAD AN AVERAGE INVESTMENT OF RS. 53.16 CRORES WHILE DIVIDEND IN COME OF RS. 206.36 LACS WAS EARNED I.T.A. NO.1729/MUM/2017 4 BY THE ASSESSEE WHICH WAS CLAIMED AS AN EXEMPT INCOME. THE MATTER WENT UP TO TRIBUNAL , WHEREIN THE TRIBUNAL VIDE ORDERS D ATED 30.04.2013 IN ITA NO. 6064 /MUM/2010 WAS PLEASED TO SET ASIDE THE MATTER BACK TO AO RELATING TO THE DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME BY INVOKING PROVISIONS OF SECTION 14A WITH THE DIRECTION TO RE - COMPUTE REASONABLE ESTIMATE OF INDIRECT EXPENSES WHICH CAN BE ATTRIBUTABLE TO INVESTMENTS. IN THE SECOND ROUND OF LITIGATION , THE AO MADE FURTHER ADDITION OF 5% OF MISCELLANEOUS EXPENSES AND OTHER EXPENSES AGGREGATING TO RS. 1.5 CRORES DEBITED IN P&L ACCOUNT WHICH LED TO DISALLOWANCE OF RS. 7.5 LACS U/S 14A OF THE 1961 ACT . THE ASSESSEE HAS SUO MOTTO VIDE LETTER DATED 1 8.09.2014 SUBMITTED THAT 5% OF SALARY OF CFO AND OTHER STAFF WHICH WORKS OUT TO RS. 77,815/ - BE DISALLOW ED U/S. 14A , WHICH ULTIMATELY LED TO TOTAL DISALLOWANCE OF RS. 8,27,815 / - , VIDE ASSESSMENT ORDER DATED 31.01.2015 PASSED BY THE AO U/S 143(3) R EAD WITH SECTION 254 OF THE 1961 ACT. 4. AGGRIEVED BY AN ASSESSMENT FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT VIDE ASSESSMENT ORDER DATED 31.01.2015 , THE ASSESSEE FILED FIRST APPEAL WITH LD. C IT (A) CHALLENGING DISALLOWANCE OF EXPENSES U/S 14A OF THE 196 1 ACT, WHICH GROUND OF APPEAL STOOD DISMISSED BY LEARNED CIT(A) VIDE APPELLATE ORDER DATED 07.12.2016 PASSED BY LEARNED CIT(A) . THE ASSESSEE ALSO CHALLENGE D LEVY OF INTEREST U/S. 234C AND 234D OF THE ACT BY THE AO WHICH CHALLENGE WAS ALSO DISMISSED BY LD. CIT(A) VIDE A PPELLATE ORDER DATED 07.12.2016 , BY HOLDING THAT CHARGEABILITY OF INTEREST U/S. 234C AND 234D OF THE 1961 ACT IS MANDATORY KEEPING IN VIEW DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. ANJUM M. H. GHASSWALA (2001) 252 ITR 1 (SC) . 5. AGGRIEVED BY THE APPELLATE ORDER DATED 07.12.2016 PASSED BY LEARNED CIT(A), THE ASSESSEE HAS NOW FILED AN APPEAL BEFORE THE TRIBUNAL . I T IS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE CONTROVERSY IN THIS APPEAL IS REGARDING COMPUTATION OF DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME I.T.A. NO.1729/MUM/2017 5 KEEPING IN VIEW PROVISIONS OF SECTION 14A OF THE 1961 ACT . AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT RULE 8D OF THE 1962 RULES IS NOT APPLICABLE FOR THE IMPUG NED ASSESSMENT YEAR 2006 - 07 , WHICH IS PRIOR TO AY 2008 - 09 FROM WHICH ASSESSMENT YEAR RULE 8D OF THE 1962 RULES IS APPLICABLE KEEPING IN VIEW DECISION OF HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF GODERJ & BOYCE MANUFACTURING COMPANY LTD. V. DCIT RE PORTED IN (2010) 328 ITR 81(BOM.) . I T IS FURTHER SUBMITTED THAT TRIBUNAL HAD IN ASSESSEE OWN CASE IN ITA NO. 1304/MUM/2011 FOR AY 200 7 - 08 VIDE ORDERS DATED 29.07.2016 HELD THAT 2% DISALLOWANCE OF DIVIDEND INCOME WILL BE REASONABLE DISALLOWANCE OF EXPENSE S INCURRED FOR EARNING OF AN EXEMPT INCOME KEEPING IN VIEW PROVISIONS OF SECTION 14A OF THE ACT. IT WAS SUBMITTED THAT ASSESSEE HAS EARNE D DIVIDEND INCOME OF RS. 206.36 LAC S AND DISALLOWANCE OF EXPENSES U/S 14A BE RESTRICTED TO 2% OF THE DIVIDEND INCOME. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD . W E HAVE OBSERVED THAT THIS IS SECOND ROUND OF LITIGATION AND IN THE FIRST ROUND OF LITIGATION AN A DDITION OF RS. 29,41,000/ - ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME WAS MADE BY INVOKING PROVISIONS OF SECTION 14A OF THE 1961 ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 . IT IS PERTINENT TO MEN TION THAT IMPUGNED ASSESSMENT YEAR BEFORE US IS AY 2006 - 07 WHICH IS PRIOR TO AY 2008 - 09. AS WE WILL SEE LATER IN THIS ORDER THAT RULE 8D OF THE 1962 RULE IS APPLICABLE FROM AY 2008 - 09. THE ASSESSEE HAD AN AVERAGE INVESTMENT OF RS. 53.16 CRORES WHILE DIVIDE ND INCOME OF RS. 206.36 LACS WAS EARNED BY THE ASSESSEE WHICH WAS CLAIMED AS AN EXEMPT INCOME. THE MATTER WENT UP TO TRIBUNAL IN FIRST ROUND OF LITIGATION , WHEREIN THE TRIBUNAL VIDE ORDERS DATED 30.04.2013 IN ITA NO. 6064/MUM/2010 WAS PLEASED TO SET ASID E THE MATTER BACK TO AO RELATING TO THE DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME U/S 14A WITH THE DIRECTION TO I.T.A. NO.1729/MUM/2017 6 RE - COMPUTE REASONABLE ESTIMATE OF INDIRECT EXPENSES WHICH CAN BE ATTRIBUTABLE TO INVESTMENTS. 6.2 IN THE SECO ND ROUND OF LITIGATION , THE AO MADE FURTHER ADDITION OF 5% OF MISCELLANEOUS EXPENSES AND OTHER EXPENSES AGGREGATING TO RS. 1.5 CRORES DEBITED IN P&L ACCOUNT , WHICH LED TO DISALLOWANCE OF RS. 7.5 LACS U/S 14A OF THE 1961 ACT . THE ASSESSEE HAD ALREADY MAD E SUO MOTTO DISALLOWANCE VIDE LETTER DATED 18.09.2014 WHEREIN 5% OF SALARY OF CFO AND OTHER STAFF WHICH WORKS OUT TO RS. 77,815/ - WAS OFFERED FOR DISALLOWANCE BY THE ASSESSEE U/S. 14A , WHICH ULTIMATELY LED TO TOTAL DISALLOWANCE OF RS. 8,27,815/ - BY THE AO IN SECOND ROUND OF LITIGATION IN AN ASSESSMENT FRAMED U/S 143(3) R.W.S. 254 OF THE 1961 ACT, VIDE ORDERS DATED 31.01.2015 .THE FIRST APPEAL FILED BY THE ASSESSEE WITH LEARNED CIT(A) IN SECOND ROUND OF LITIGATION STOOD DISMISSED BY LEARNED CIT(A) VIDE APP ELLATE ORDER DATED 07.12.2016 . 6.3 WE HAVE OBSERVED THAT THE IMPUGNED ASSESSMENT YEAR BEFORE US IS AY 2006 - 07 AND RULE 8D OF THE 1962 RULES IS NOT APPLICABLE FOR THIS YEAR KEEPING IN VIEW DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BO YCE MANUFACTURING COMPANY LIMITED(SUPRA) . THE SAID RATIO OF LAW LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING LIMITED(SUPRA) HOLDING THAT RULE 8D OF THE 1962 RULES IS PROSPECTIVE BEING APPLICABLE FROM AY 2008 - 09 ONWAR DS IS NOW BEEN CONFIRMED BY HONBLE SUPREME COURT IN THE CASE OF CIT V. ESSAR TELEHOLDINGS LIMITED , VIDE JUDGMENT DATED 31.01.2018 REPORTED IN (2018) 401 ITR 445(SC), WHEREIN HONBLE SUPREME COURT HELD AS UNDER: 48 . APPLYING THE PRINCIPLES OF STATUTORY INTERPRETATION FOR INTERPRETING RETROSPECTIVITY OF A FISCAL STATUTE AND LOOKING INTO THE NATURE AND PURPOSE OF SUB - SECTION (2) AND SUB - SECTION (3) OF SECTION 14A AS WELL AS PURPOSE AND INTENT OF RULE 8D COUPLED WITH THE EXPLANATORY NOTES IN THE FINANCE BI LL, 2006 AND THE DEPARTMENTAL UNDERSTANDING AS REFLECTED BY CIRCULAR DATED 28.12.2006, WE ARE OF THE CONSIDERED OPINION THAT RULE 8D WAS INTENDED TO OPERATE PROSPECTIVELY. I.T.A. NO.1729/MUM/2017 7 49 . IT IS RELEVANT TO NOTE THAT IMPUGNED JUDGMENT IN THIS APPEAL RELIES ON EARLIER JUDGMENT OF BOMBAY HIGH COURT IN GODREJ AND BOYCE MANUFACTURING CO. LTD. (SUPRA) WHERE THE DIVISION BENCH OF THE BOMBAY HIGH COURT AFTER ELABORATELY CONSIDERING THE PRINCIPLES TO DETERMINE THE PROSPECTIVITY OR RETROSPECTIVITY OF THE AMENDMENT HAS CONCLUDED THAT RULE 8D IS PROSPECTIVE IN NATURE. AGAINST THE AFORESAID JUDGMENT OF THE BOMBAY HIGH COURT DATED 12.08.2010 AN APPEAL WAS FILED IN THIS COURT WHICH HAS BEEN DECIDED BY VIDE ITS JUDGMENT REPORTED IN GODREJ AND BOYCE MFG CO. LTD. (SUPRA). THIS COURT, WH ILE DECIDING THE ABOVE APPEAL REPELLED THE CHALLENGE RAISED BY THE ASSESSEE REGARDING VIRES OF SECTION 14A. IN PARA 36 OF THE JUDGMENT, THIS COURT NOTICED THAT WITH REGARD TO RETROSPECTIVITY OF PROVISIONS REVENUE HAD FILED APPEAL, HENCE THE SAID QUESTION W AS NOT GONE INTO THE AFORESAID APPEAL. IN THE ABOVE CASE, THIS COURT SPECIFICALLY LEFT THE QUESTION OF RETROSPECTIVITY TO BE DECIDED IN OTHER APPEALS FILED BY THE REVENUE. WE THUS HAVE PROCEEDED TO DECIDE THE QUESTION OF RETROSPECTIVITY OF RULE 8D IN THESE APPEALS. 50. IN VIEW OF OUR OPINION AS EXPRESSED ABOVE, DISMISSAL OF THE APPEAL BY THE BOMBAY HIGH COURT IS FULLY SUSTAINABLE. AS HELD ABOVE, THE RULE 8D IS PROSPECTIVE IN OPERATION AND COULD NOT HAVE BEEN APPLIED TO ANY ASSESSMENT YEAR PRIOR TO ASSESSMEN T YEAR 2008 - 09. 6.4 WE HAVE ALSO OBSERVED THAT MUMBAI - TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007 - 08 IN ITA NO. 1304/MUM/2011 VIDE ORDERS DATED 29.07.2016 HAS UPHELD DISALLOWANCE OF EXPENSES U/S 14A OF THE 1961 ACT @2% OF DIVIDEND INCOME AS REASONABLE EXP ENSES IN RELATION TO EARNING OF AN EXEMPT INCOME, , BY HOLDING AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007 - 08, THE PROVISIONS OF RULE 8D HAVE NO APPLICATION AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. IT WAS HELD THAT RULE 8D APPLIES ONLY PROSPECTIVELY. THEREFORE, WE HOLD THAT PROVISIONS OF RULE 8D HAVE NO APPLICATION FOR ASSESSMENT YEAR 2007 - 08. HOWEVER, REASONABLE DISALLOWANCE SHOULD BE MADE AND WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A AT 2% OF THE DIVIDEND INCOME AS REASONABLE EXPENSES FOR EARNING EXEMPT INCOME. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 6.4 THE PRINCIPLES OF RES - JUDICATA ARE NOT APPLICABLE IN THE INCOME - TAX PROCEEDINGS BUT RULE OF CONSISTENCY HAS TO BE FOLLOWED AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT I.T.A. NO.1729/MUM/2017 8 (1992) 193 ITR 321(SC) , WHEREIN HONBLE SUPREME COURT HELD AS UNDER: 13. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RES JUDICATA DOES NOT APPLY TO INCOME - TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESS MENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT IS NOT SHOWN TO US BY LEARNED DR AS TO HOW FACTUAL MATRIX IN AY 2006 - 07 IS DIFFERENT FROM THAT OF AY 2007 - 08. BOTH THE YEARS ARE PRIOR TO AY 2008 - 09 FROM WHERE ONWARDS RU LE 8D OF THE 1962 RULES IS HELD TO BE APPLICABLE. THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF HONBLE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1304/MUM/2011 FOR AY 2007 - 08 VIDE ORDER DATED 29.07.2016 , WE ARE OF THE CONSIDERED VIEW THAT END OF JUSTICE WILL BE MET IN THIS CASE IF DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME U/S 14A OF THE 1961 ACT BE RESTRICTED TO 2% OF DIVIDEND INCOME . GROUND NO. 1 IS PARTLY ALLOWED. WE ORDER ACCORDINGLY. 7 . GROUND NO. 2 AND 3 RAISED BY THE ASSESSEE IN ITS APPEAL FILED WITH TRIBUNAL ARE CONCERNING LEVY OF INTEREST U/S. 234C AND 234D OF THE ACT. FOR LEVIABILITY OF INTEREST U/S 234C, IT IS CLAIMED THAT THE ASSESSEE HAD PAID ADVANCE TAX IN TIME AND NO INTEREST U/S 234C CAN BE LEVI ED. IT WAS SUBMITTED THAT MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE THAT ADVANCE TAX WAS PAID IN TIME. SO FAR AS INTEREST LEVIED U/S 234D, IT IS CLAIMED THAT THE SAME IS CONSEQUENTIAL IN NATURE AND THIS ISSU E MAY ALSO BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION. IT IS AGREED BY LEARNED COUNSEL FOR THE ASSESSEE THAT LEVYING OF INTEREST U/S 234C AND 234D IS MANDATORY AND THERE IS NO DISPUTE AS FAR AS MANDATORY NATURE OF THE INTEREST U/S 234C AND 234D IS CONCERNED BUT KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE C ASE NO INTEREST IS EXIGIBLE. REFERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA(SUPRA). THE LD. DR DID NOT OBJECTED IF THE MATTER IS I.T.A. NO.1729/MUM/2017 9 RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATION OF THE CONTENTION S OF THE ASSESSEE AND FOR DECIDING THE QUANTUM OF INTEREST U/S 234C AND 234D IN ACCORDANCE WITH LAW . THUS , KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THIS MATTER NEED TO BE RESTORED TO THE FILE OF THE AO FOR VERIFICATIO N OF CONTENTIONS OF THE ASSESSEE THAT THERE IS NO SHORTFALL IN PAYMENT OF ADVANCE TAX AND THEREAFTER QUANTIFICATION OF INTEREST U/S. 234C LEVIABLE ON THE ASSESSEE BE DETERMINED BY THE AO IN ACCORDANCE WITH LAW. SIMILARLY, WE ARE RESTORING THE ISSUE OF QUA NTIFICATION OF INTEREST U/S 234D TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER VERIFICATION OF THE CONTENTIONS OF THE ASSESSEE. SO FAR AS APP LICABILITY OF INTEREST U/S. 234C AND 234D ARE CONCERNED, IT AGREED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THER E IS NOT DISPUTE THAT THE LEVY OF SUCH INTEREST U/S 234C AND 234D ARE MANDATORY IN NATURE . NEEDLESS TO SAY THAT THE AO SHALL PROVIDE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPAL OF NATURAL JUSTICE IN ACCORDANCE WITH LAW IN SET A SIDE PROCEEDINGS , AND EVIDENCES/EXPLANATIONS SUBMITTED BY THE ASSESSEE WILL BE ADMITTED BY THE AO WHO SHALL ADJUDICATE THE SAME ON MERITS IN ACCORDANCE WITH LAW. THE GROUND NO. 2 AND 3 ARE ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 8 . IN T HE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1729/MUM/2017 FOR AY 2006 - 07 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 9 .03.2019. 2 9 .03.2019 S D / - S D / - ( MAHAVIR SI NGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 9 .03.2019 NISHANT VERMA I.T.A. NO.1729/MUM/2017 10 SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI