ALCO COMPANY P.LTD, MUMBAI V. ITO WD 2(1)(1), MUMBAI

ITA 1747/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1967 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Assessee Lawyers: CHETAN KARIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1747 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) ALCO COMPANY PRIVATE LIMITED, 3 RD FLOOR, RAHIMTOOLA HOUSE, 7 HOMJI STREET, FORT, MUMBAI 400 001. / V. THE INCOME TAX OFFICER- WARD 2(1), MUMBAI. ./ PAN : AAACA 1031 G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI CHETAN KARIA REVENUE BY : MS. VINITA J. MENON / DATE OF HEARING : 16-12-2015 / DATE OF PRONOUNCEMENT : 23-12-2015 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE COMPANY , BEING I TA NO. 1747/MUM/2013, IS DIRECTED AGAINST THE ORDER DATED 26-12-2012 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 4 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009- 10. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE COM PANY IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- ITA 1747/M/13 2 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING DISALLOWANCE OF RS. 43,48,277/- U/S. 14A . 2) THE APPELLANT PRAYS THAT: I) DISALLOWANCE OF RS. 43,48,277/- U/S. 14A MAY BE DELETED AND/OR REDUCED; II) PERSONAL HEARING MAY BE GRANTED; III) ANY OTHER RELIEF YOUR HONOURS MAY DEEM FIT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN INSULATION MATERIAL, ROO FING SHEETS, WATER PROOFING MATERIAL, ACRYLIC SANITARY WARE AND GALVANIZED SHEE T. APART FROM THE ABOVE, THE ASSESSEE COMPANY IS ALSO DEALING IN PURCHASE/SA LE OF SHARES AND SECURITIES AND DERIVED PROFIT ON SALE OF INVESTMENT S. FURTHER, THE ASSESSEE COMPANY RECEIVED INTEREST INCOME ON TAX FREE BONDS, INCOME TAX REFUND AND FIXED DEPOSITS. THE ASSESSEE COMPANY ALSO CLAIMED DIVIDED INCOME OF RS. 8,40,14,974/- AS EXEMPT INCOME. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALLED THE ACT) READ W ITH SECTION 143(2) OF THE ACT, THE LEARNED ASSESSING OFFICER (HEREINAFTER CAL LED THE AO) OBSERVED THAT NO PART OF THE EXPENSES WERE CONSIDERED FOR EARNING EXEMPT INCOME AND THE ASSESSEE COMPANY WAS ASKED TO FURNISH DETAILED WORK ING OF DISALLOWANCE U/S 14A OF THE ACT. THE A.O. HELD THAT RULE 8-D OF THE INCOME TAX RULES, 1962 IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 ONWARDS AND HENCE IS APPLICABLE FOR THE CURRENT YEAR UNDER CONSIDERATION I.E. ASSESSMEN T YEAR 2009-10 AND ACCORDINGLY ASSESSEE COMPANY WAS ASKED TO COMPUTE T HE EXPENSES RELATED TO INCOMES AS PER SECTION 14 A OF THE ACT READ WITH RU LE 8D OF THE INCOME TAX RULES, 1962. THE A.O. WORKED OUT THE DISALLOWANCE UNDER RULE 8D OF INCOME TAX RULES, 1962 AS UNDER:- ITA 1747/M/13 3 (A) INTEREST PAID = RS. NIL (B) AVERAGE INVESTMENTS = RS. 86,96,55,303/- (C) AVERAGE OF TOTAL INVESTMENTS IN BALANCE SHEET = NA WORKING OF DISALLOWANCE U/S 14A: I EXPENSES DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME ALREADY DISALLOWED IN COMPUTATIONRS. 5,13,278/- NIL II INTEREST NOT DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME (A X B/C) N.A. N.A. III 0.5% OF AVERAGE VALUE OF INVESTMENTS 0.5% OF RS. 86,96,55,303/- RS. 43,48,277 TOTAL DISALLOWANCE U/S 14A READ WITH RULE 8D OF I.T. RULES RS. 43,48,277/- THE A.O., THUS ADDED AN AMOUNT OF RS. 43,48,277/- T O THE ASSESSEES COMPANY TOTAL INCOME U/S 14A OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 21-11-2 011 PASSED U/S 143(3) OF THE ACT OF THE AO, THE ASSESSEE COMPANY PREFERRED A N APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE ASSESSEE COMPANY HAS EARNED DIVIDEND INCOME OF RS. 8,40,14,978/- FROM LISTED COMPANIES AND MUTUAL FUND S AND AN AMOUNT OF RS.13,38,525/- AS INTEREST INCOME ON 6.75% A.R.S. T AX FREE BONDS WHICH HAS BEEN CLAIMED EXEMPT FROM INCOME TAX WHEREAS ONL Y RS. 5,13,278/- WERE OFFERED FOR DISALLOWANCE U/S 14A OF THE ACT . THE A .O. APPLIED RULE 8D OF INCOME TAX RULES, 1962 AND MADE FURTHER DISALLOWANC E OF RS. 43,48,277/- BEING EQUIVALENT TO 0.5% OF AVERAGE INVESTMENT ON A CCOUNT OF ADMINISTRATIVE EXPENSES. THE ASSESSEE COMPANY SUBMITTED THAT AN A MOUNT OF RS. 11,93,471/- ARE DIRECTLY RELATED TO INVESTMENT ACTI VITY, WHICH THE ASSESSEE COMPANY AGREED TO DISALLOWANCE AS PER DETAILS SUBMI TTED TO THE CIT(A) . THE ASSESSEE COMPANY CLAIMED THAT ONLY EXPENSES TOTALIN G TO RS. 2,70,193/- ARE TO BE ALLOCATED BETWEEN EXEMPT INCOME AND OTHER IN COME. THE ASSESSEE ITA 1747/M/13 4 COMPANY SUBMITTED THAT THE BALANCE EXPENSES INCURRE D BY THE ASSESSEE CLAIMED TO BE RELATING TO SALES ONLY AND ITS ADDITI ONAL DISALLOWANCE CANNOT BE MORE THAN RS. 9,29,622/- , IN ADDITION TO RS. 5,13, 278/- WHICH HAS ALREADY BEEN OFFERED FOR DISALLOWANCE. THE ASSESSEE COMPAN Y SUBMITTED THAT IT HAS PURCHASED SHARES MANY YEARS BACK AND IS NOT REQUIRE D TO INCUR ANY EXPENDITURE FOR EITHER MAINTAINING ITS SHAREHOLDING OR EARNING DIVIDEND ON SUCH SHARES EXCEPT FOR DE-MAT EXPENSES, WHICH HAS B EEN VOLUNTARILY DISALLOWED BY THE ASSESSEE COMPANY. THE ASSESSEE C OMPANY SUBMITTED THAT IT HAS NOT INCURRED ANY EXPENDITURE TO EARN DIVIDEN D INCOME AND THE DIVIDEND DECLARED BY THE COMPANY IS GENERALLY RECEIVED ONCE A YEAR AND DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY. THE ASSE SSEE COMPANY SUBMITTED THAT ITS OWN SURPLUS FUNDS HAVE BEEN INVESTED IN TH E SECURITIES FROM WHICH THE EXEMPT DIVIDEND / INTEREST INCOME HAS BEEN EARN ED AND NO BORROWED FUNDS ARE UTILIZED FOR MAKING INVESTMENTS. THUS, IN NUTSHELL THE ASSESSEE COMPANY SUBMITTED THAT IT HAS NOT INCURRED ANY EXPE NDITURE WHATSOEVER FOR EARNING THE EXEMPT INCOME EXCEPT THE AMOUNT VOLUNTA RILY DISALLOWED BY THE ASSESSEE COMPANY AND ALL THE EXPENDITURE DEBITED TO THE P&L ACCOUNT OF THE ASSESSEE COMPANY HAS BEEN INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF THE ASSESSEES COMPANY BUSINESS. THE ASSESSEE CO MPANY SUBMITTED THAT OUT OF ABUNDANT CAUTION AND TO BUY PEACE OF MIND AN D TO AVOID LITIGATION , THE ASSESSEE COMPANY HAS VOLUNTARILY OFFERED FOR DISALL OWANCE OF EXPENDITURE OF RS.14,42,900/- US/ 14A OF THE ACT WHICH INCLUDES RS .5,13,278/- SUO MOTO DISALLOWED IN THE RETURN OF INCOME FILED WITH THE R EVENUE .THE ASSESSEE COMPANY SUBMITTED THAT AO ERRED IN SAYING THAT THE ASSESSEE COMPANY HAS NOT OFFERED FOR DISALLOWANCE ANY EXPENDITURE U/S 14 A OF THE ACT IN THE RETURN OF INCOME FILED WITH THE REVENUE WHILE FACT OF THE MATTER IS THAT THE ASSESSEE COMPANY DISALLOWED EXPENDITURE OF RS.5,13,278/- U/S 14A OF THE ACT . THE ASSESSEE COMPANY SUBMITTED THAT AO CANNOT PROCEED T O COMPUTE DISALLOWANCE UNDER RULE 8D OF INCOME TAX RULES, 196 2 BEFORE RECORDING THE FINDING THAT THE DISALLOWANCE MADE BY THE ASSESSEE COMPANY IS INCORRECT. ITA 1747/M/13 5 THE CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE OBSERVED THAT BY THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. CIT, 328 IT R 81(BOM.) , HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D OF INCOME TAX RULES, 1962 IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 FOR COMPUTI NG THE DISALLOWANCE U/S 14A OF THE ACT AND ACCORDINGLY AS PER RULE 8D OF IN COME TAX RULES, 1962, DIRECT EXPENSES ON ACCOUNT OF INTEREST AND OTHER EX PENSES ARE TO BE DISALLOWED IN ADDITION ON ACCOUNT OF APPORTIONABLE EXPENSES OF 0.5% OF AVERAGE INVESTMENT MADE BY THE ASSESSEE COMPANY. T HE CIT(A) ACCORDINGLY HELD THAT THE A.O. HAS RIGHTLY APPLIED RULE 8D OF I NCOME TAX RULES, 1962 FOR MAKING THE DISALLOWANCE OF EXPENSES TO THE TUNE OF RS.43,48,277/- AND THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO. 6. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEE COMPANY IS IN FURTHER APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMITT ED THAT THE ASSESSEE COMPANY HAS VOLUNTARILY OFFERED AN AMOUNT OF RS. 5, 13,278/- WHILE COMPUTING THE DISALLOWANCE U/S 14A OF THE ACT. THE LD. COUNSEL SUBMITTED THAT THE INVESTMENT OF RS. 90,43,30,175/- MADE BY T HE ASSESSEE COMPANY ARE MOSTLY OLD INVESTMENTS AND THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO THE EXEMPT INCOME EXCEPT AN AMOUNT OF RS. 5,13,278/-. THE LD. COUNSEL SUBMITTED THAT THE ASSE SSEE COMPANY HAS VOLUNTARILY OFFERED AN AMOUNT OF RS. 14,42,900/- TO WARDS EXPENDITURE TO BE DISALLOWED UNDER SECTION 14A OF THE ACT IN ORDER TO BUY PEACE AND AVOID LITIGATION WITH THE REVENUE BUT THE A.O. HAS APPLIE D RULE 8D OF INCOME TAX RULES, 1962 WITHOUT ANY FINDING THAT HOW THE AMOUNT OF DISALLOWANCE OFFERED BY THE ASSESSEE COMPANY IS INCORRECT. THE LD. COUNS EL OF THE ASSESSEE COMPANY SUBMITTED THAT, BEFORE PROCEEDING TO APPLY RULE 8D OF INCOME TAX RULES, 1962, FIRST THE A.O. HAS TO BRING ON RECORD COGENT MATERIAL TO DISALLOW ITA 1747/M/13 6 THE CLAIM OF THE ASSESSEE COMPANY AS PER MANDATE OF SECTION 14A(2) OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE COMPANY SHOWE D US THE EXPENSES OF RS. 1,03,30,994/- AS PER SCHEDULE 11 WHICH IS PART OF A UDITED ACCOUNTS OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR 2008-09 WHI CH IS PLACED AT PAGE 27 OF ASSESSEES PAPER BOOK AND CONTENDED THAT THESE A RE THE EXPENSES INCURRED BY THE ASSESSEE COMPANY AND MOST OF THE EXPENSES AR E INCURRED FOR BUSINESS PURPOSE OF THE ASSESSEE. ON BEING ASKED, THE LD. C OUNSEL SUBMITTED THAT THE SALES OF GOODS DEALT WITHIN BY THE ASSESSEE COMPANY EFFECTED BY THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR 2009-10 WAS RS. 62,48,788/- WHILE THE DIVIDEND /INTEREST INCOME RECEIVED WAS RS. 8,62,09, 965/-. THE LD. COUNSEL OF THE ASSESSEE COMPANY ALSO SUBMITTED THAT NO BORROWE D FUNDS WERE DEPLOYED BY THE ASSESSEE FOR MAKING THESE INVESTMENTS AND TH E A.O. HAS WRONGLY APPLIED RULE 8D(2)(III) OF INCOME TAX RULES, 1962 B Y DISALLOWING THE EXPENSES OF RS.43,48,277/- BEING 0.5% OF THE TOTAL AVERAGE I NVESTMENTS OF RS. 86,96,55,303/- ON WHICH THE EXEMPT INCOME IS EARNE D. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT FOR ASSESSMENT YEA RS 2005-06 & 2006-07, THE METHOD OF DETERMINATION OF DISALLOWANCE ADOPTED BY THE ASSESSEE COMPANY HAS BEEN ACCEPTED BY THE CIT(A) WHICH IS NO T CHALLENGED BY THE REVENUE. 5. THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE A.O. HAS RIGHTLY APPLI ED RULE 8D OF INCOME TAX RULES ,1962 IN THE CASE OF THE ASSESSEE COMPANY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PER USED THE MATERIAL PLACED ON RECORD. WE HAVE OBSERVED THAT THE ASSESSE E COMPANY HAS MADE INVESTMENT OF RS. 90,43,30,175/- AS ON 31 ST MARCH, 2009 , OF WHICH THE MARKET VALUE OF THE SAID INVESTMENT AS ON 31-03-200 9 IS RS.326.63 CRORES. THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE CO MPANY IS RS. 8,40,14,974/- AND INTEREST OF RS13,38,525/- ON 6.75 % A.R.S. TAX FREE BONDS ITA 1747/M/13 7 IS ALSO EARNED BY THE ASSESSEE COMPANY DURING THE P REVIOUS YEAR , WHICH ARE CLAIMED AS EXEMPT INCOME. THE ASSESSEE COMPANY HAS MADE SALES OF PRODUCTS IN TRADING BUSINESS OF RS. 62,48,788/- WHICH IS R ELATIVELY A SMALL AMOUNT AS COMPARED TO THE DIVIDEND AND INTEREST INCOME OF RS. 8,62,09,965/- EARNED BY THE ASSESSEE COMPANY DURING THE YEAR. THE ASSESSEE COMPANY HAS PURCHASES(NET OF INCREASE/ DECREASE IN STOCK ) OF T RADED GOODS DEALT IN BY THE COMPANY OF RS. 50,14,097/- WHILE SALES OF TRADED G OODS STOOD AT RS.62,48,788/- DURING THE YEAR AND THE EXPENSES INC URRED BY THE ASSESSEE COMPANY IS TO THE TUNE OF RS.1,03,30,994/- , OUT OF WHICH EXPENSES ON EMPLOYEES AND THEIR PERKS IS RS. 63,46,983/- , WHIL E THE INVESTMENT IN SHARES AND SECURITIES AS PER MARKET VALUE AS ON 31-03-2009 STOOD AT RS 326.63 CRORES AND ALSO CASH FLOW STATEMENT OF THE ASSESSEE COMPANY AS PER AUDITED ACCOUNTS REVEAL THAT THE TOTAL OF SALE AND PURCHASE OF SECURITIES DURING THE YEAR STOOD AT RS.31.14 CRORES WHILE THERE HAS BEEN LOSS INCURRED ON SALE OF INVESTMENTS OF RS.86,84,676/- DURING THE YEAR WHILE IN IMMEDIATELY PRECEDING YEAR THE PROFIT ON SALE OF INVESTMENT STOOD AT RS. 74,89,568/- WHICH ARE ALL STRONG INDICATORS ON THE TOUCHSTONE OF PREPONDERAN CE OF PROBABILITIES THAT THE MAIN FOCUS AREA AND SUBSTANTIAL ACTIVITY OF TH E ASSESSEE COMPANY IS MANAGEMENT AND MONITORING OF INVESTMENTS IN SHARES AND SECURITIES , FROM WHICH SUBSTANTIAL STREAM OF INCOME BY WAY OF EXEMPT INCOME OF DIVIDEND AND INTEREST ARE EARNED BY THE ASSESSEE COMPANY. THE TO TAL SHARE CAPITAL AND RESERVES OF THE COMPANY ARE RS. 102.85 CRORES, OUT OF WHICH RS.90.43 CRORES ARE INVESTMENTS IN THE SHARES AND SECURITIES , RS. 11.10 CRORES IN LOANS AND ADVANCES WHILE APPROX RS 99.92 LACS IS CASH AND B ANK BALANCE AND VIS--VIS INVESTMENT IN FIXED ASSETS IS ONLY RS 22.65 LACS AN D THE INVENTORIES ARE MERELY RS 37.05 LACS WHILE SUNDRY DEBTORS ARE RS 3. 32 LACS, WHICH AGAIN STRONGLY INDICATES ON TOUCHSTONE OF PREPONDERANCE O F PROBABILITIES THAT THE SUBSTANTIAL ACTIVITY OF THE COMPANY IS MAKING INVES TMENTS AND GRANTING LOANS AND ADVANCES RATHER THAN DOING TRADING OF THE GOODS DEALT IN BY THE ASSESSEE COMPANY WHICH IN OUR CONSIDERED VIEW IS THAT THE TR ADING ACTIVITY UNDERTAKEN ITA 1747/M/13 8 BY THE ASSESSEE COMPANY CONSTITUTES INSIGNIFICANT A REA OF OPERATIONS VIS--VIS INVESTMENT ACTIVITY OF THE ASSESSEE COMPANY. THE CO PIES OF AUDITED ACCOUNTS OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR 2008 -09 ARE PLACED AT PAGE 16- 34 OF PAPER BOOK FILED BY THE ASSESSEE COMPANY , FR OM WHICH THE ABOVE FIGURES ARE EXTRACTED .THE AUTHORITIES BELOW HAVE N OT ACCEPTED THE CONTENTIONS OF THE ASSESSEE COMPANY WITH RESPECT TO THE CLAIM O F THE ASSESSEE COMPANY WITH RESPECT TO THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE COMPANY IN RELATION TO THE EARNING OF EXEMPT INCOME AND THE REAFTER, PROCEEDED TO APPLY RULE 8D OF INCOME TAX RULES, 1962. RULE 8D OF INCOM E TAX RULES, 1962 IS APPLICABLE FROM THE ASSESSMENT YEAR 2008-09 AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. (SUPRA) AND IN THE INSTANT APPEAL THE RELEVANT ASSESSMENT YEAR IS 2009-10 WHEREBY RULE 8D OF INCOME TAX RULES, 1962 IS CLEARLY APPLICABLE WHI CH IS MERELY A MACHINERY PROVISIONS TO COMPUTE DISALLOWANCE U/S 14A OF THE A CT WHICH IS A SUBSTANTIVE SECTION TO DISALLOW EXPENDITURE INCURRED IN RELATIO N TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW HAVE RIGHTLY APPLIED THE RULE 8D OF INCOME TAX RULES, 1962 IN THE INSTANT CASE AS THE RELEVANT ASSESSMENT YEAR IS 2009-10 KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CA SE WHICH WE HAVE DISCUSSED ABOVE IN THIS ORDER. THE CONTENTIONS OF T HE ASSESSEE COMPANY THAT THE CIT(A) HAS ACCEPTED THE METHOD OF COMPUTATION A DOPTED BY THE ASSESSEE COMPANY FOR ASSESSMENT YEAR 2005-06 AND 2006-07 CAN NOT BE ACCEPTED AS FIRST OF ALL PRINCIPLES OF RES-JUDICATA ARE NOT APP LICABLE TO INCOME TAX PROCEEDINGS, SECONDLY RULE 8D OF INCOME TAX RULES, 1962 IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 AS HELD BY HONBLE BOMBAY H IGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD(SUPRA) AND THE RELEVANT ASSESSMENT YEAR UNDER APPEAL IS ASSESSMENT YEAR 2009-10 WHILE RULE 8D OF INCOME TAX RULES,1962 CANNOT BE APPLIED TO THE ASSESSMENT YEAR 2005-06 AND 2006-07, AND THIRDLY ON MERITS BASED ON FACTS AND CIRCUMSTAN CES OF THE CASE , WE HAVE OBSERVED ABOVE THAT THE SUBSTANTIAL ACTIVITY OF THE ASSESSEE COMPANY IS TO ITA 1747/M/13 9 MAKE INVESTMENTS AND SUBSTANTIAL AMOUNT OF REVENUE STREAM FOR THE ASSESSEE COMPANY IS FROM DIVIDENDS AND INTEREST INCOME WHIC H ARE EXEMPT FROM TAX. THUS, MOST HUMBLY WE REJECT THE CONTENTIONS OF THE ASSESSEE COMPANY AND WE UPHOLD THE DISALLOWANCE OF TOTAL EXPENDITURE OF RS . 43,48,277/- MADE BY THE AO UNDER SECTION 14A OF THE ACT READ WITH RULE 8D O F INCOME TAX RULES, 1962 , IN THE CASE OF THE ASSESSEE COMPANY KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE . WE DO NOT FIND ANY INFIRMITY IN THE ORDERS PASSED BY THE CIT(A) WHICH WE CONFIRM AND DISMISS T HE GROUNDS OF APPEAL RAISED BY THE ASSESSEE COMPANY IN THIS APPEAL. WE O RDER ACCORDINGLY 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2015. # $% &' 23-12-2015 ( ) SD/- SD/- (JOGINDER SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 23-12-2015 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI