M/S. NEELACHAL NATURAL RESOURCES PVT. LTD., Kolkata V. ACIT, CC-II, KOLKATA, Kolkata

ITA 1806/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48097 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R PUROKAYASTHA
• Section: 143(3); 14A

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () , , , !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I AKBER BASHA, AM] # # # # / I.T.A NO. 1806/KOL/2009 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2006-07 M/S. NEELACHAL NATURAL RESOURCES (P) LTD. VS. ASSI STANT COMMISSIONER OF INCOME-TAX (PAN-AAACN 8890 Q) CENTRAL CIRCLE-II, KOLKATA. ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI RAJEEVA KUMAR FOR THE RESPONDENT: SHRI B. R. PUROKAYASTHA ! / ORDER PER SHRI MAHAVIR SINGH/ : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A), CENTRAL-III, KOLKATA IN APPEAL NO. 120/CC-II/CIT(A)/C-III/08-09 DATED 01.09 .2009. THE ASSESSMENT WAS FRAMED BY ACIT, C.C-II, KOLKATA, U/S. 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DA TED 23.12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER MAKI NG DISALLOWANCE U/S. 14A BY INVOKING RULE 8D OF I. T. RULES, 1962. FOR THIS, THE ASSESSEE HA S RAISED THE FOLLOWING GROUND NO.1: 1. THAT THE LD. CIT(A)-C-III, KOL, FAILED TO APPRE CIATE THE SUBMISSION MADE BEFORE HIM REGARDING DISALLOWANCE U/S. 14A READ WITH RULE 8D T HAT THE SAME IS NOT APPLICABLE RETROSPECTIVELY. THE DISALLOWANCE U/S. 14A NEED TO HAVE BEEN RESTRICTED TO 1% OF DIVIDEND INCOME OF RS.26,076/- INCONFORMITY TO THE DECISIONS OF JURISDICTIONAL TRIBUNAL. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE HAS RECEIVED DIVIDEND OF RS.26,076/- AND ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF I. T. RULES, 1962 DETERMINED THE DISALLOWABLE EXPENDITURE QUA THE EXE MPT INCOME AT RS.1,88,023/- THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE AS UN DER: AVERAGE VALUE OF INVESTMENT RS. 40,65,547/- AVERAGE VALUE OF ASSETS RS.4,77,42,908/- INTEREST PAID RS. 19,69,309/- INTEREST DISALLOWED 1969309 X (4065547/47742908) = RS.1,67,696/- 2 ITA 1806/K/20 0 9 NEELACHAL NATURAL RESOURCES (P) LTD.. A.Y. 06-07 EXPENSES DISALLOWED 0.5% OF 4065547 RS.20,327/ - TOTAL DISALLOWANCE U/S. 14A IS RS.1,88,023/- AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF SPEC IAL BENCH OF THIS TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. (2009) 312 ITR 1 (SB), WHEREIN VIDE PARA 3 OF HIS ORDER IT HAS BEEN HELD AS UNDER: THE RIVAL CONTENTIONS HAVE BEEN CONSIDERED. ON A DIVIDEND INCOME OF RS.26,076/-, THE A.O. APPL YING THE PROVISION OF SECTION 14A READ WITH RULE 8D DISALLOWED INTEREST AMOUNTING TO RS.1,67,697/- AND EXPENSES OF RS.20,327/- BOTH AGGREGATING TO RS.1,88,023/-, AND ASSESSED TO TAX. THE DECISION OF THE A.O. IS FULLY IN CONFORMITY WITH THE PROVISION OF LAW AND THE DECISION OF THE SPECIAL BENCH OF THE HONBLE ITAT IN THE CASE OF DA GA CAPITAL MANAGEMENT PVT. LTD. (2009) 312 ITR 1 (SB), WHICH HELD RULE 8D TO B E RETROSPECTIVE IN OPERATION. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, THE ADDITIONS MADE BY THE A.O. ARE HEREBY CONFIRMED. THE GROUND NO.1 IS DISMI SSED. WE FIND THAT THIS ISSUE IS NOT SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LTD. VS. DCI T [2010] 328 ITR 81 (BOM.) AT PAGES 138 & 139 VIDE SUB PARAS (V) TO (VII) ARE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX R ULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, SHALL APPLY WITH E FFECT FROM THE ASSESSMENT YEAR 2008-09; (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09, WHE N RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFF ICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002 -03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASONABLE BASIS FOR EFFECTING THE APPORTIONM ENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS THE HONBLE BOMBAY HIGH COURT HAS REQUIRED THE N EXUS AND A REASONABLE DISALLOWANCE, AS CONCEDED BY THE LD. COUNSEL FOR THE ASSESSEE AND IN VIEW OF FACTS OF THIS CASE AND THE PRINCIPLE LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LTD. (SUPRA), THAT RULE 8D IS APPLICABLE FOR AND FROM ASSESSMENT YEAR 2008-09 AND PRIOR TO THAT THE ASSESSING 3 ITA 1806/K/20 0 9 NEELACHAL NATURAL RESOURCES (P) LTD.. A.Y. 06-07 OFFICER CAN MAKE ESTIMATE IN THE GIVEN FACTS AND CI RCUMSTANCES. HENCE, WE RESTRICT THE DISALLOWANCE TO 1% OF DIVIDEND INCOME I.E. RS.26,07 6/- AND DIRECT THE ASSESSING OFFICER TO CALCULATE THE EXPENDITURE ON THAT BASIS. THIS GROU ND OF ASSESSEES APPEAL IS ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 5. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , !' , (AKBER BASHA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( -' -' -' -') )) ) DATED 2ND MAY, 2011 ./ $01 2 JD.(SR.P.S.) ! 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT M/S. NEELACHAL NATURAL RESOURCES (P) LTD. , 9, PARSEE CHURCH STREET, KOLKATA-700 001. 2 +,)* / RESPONDENT ACIT, CENTRAL CIRCLE-II, KOLKATA. 3 . $ ( )/ THE CIT(A), KOLKATA 4. 5. $ / CIT KOLKATA 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, ! $>/ BY ORDER, 1 /ASSTT. REGISTRAR .