HINDUSTAN CANDLE MANUFACTURING COMPANY P. LTD, MUMBAI V. ACIT 6(3), MUMBAI

ITA 1949/MUM/2013

• Counselvise Citation: 194919914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 17-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR DR
• Assessee Lawyers: VIJAY MEHTA; ANUJ KISNADWALA
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALH BENCH, MUMB AI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI D. KARUNAKARA RAO, AM ITA NOS. 1949 & 1950/MUM/2013 ASSESSMENT YEARS-2009-10 & 2008-09 HINDUSTAN CANDLE MANUFACTURING COMPANY PRIVATE LIMITED KHATU BUILDING LALBAUG, MUMBAI-400012 / VS. ACIT - 6(3), MUMBAI ! ./ PAN :ABNPM8226G ( '#!$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) '#!$' ( / ASSESSEE BY: SHRI VIJAY MEHTA & SHRI ANUJ KISNADWALA %&!$ ' ( / RESPONDENT BY : SHRI JEETENDRA KUMAR - DR ) *+ ' , - / DATE OF HEARING 11/11/2014 ./ ' , - / DATE OF PRONOUNCEMENT : 11/11/2014 1 / O R D E R PER JOGINDER SINGH, JM: THESE APPEALS ARE BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDERS DATED 18/02/2013 & 13/12/2012 RESPECTIVELY OF THE LD. FIRST APPELLATE AUTHORITY. 2. THOUGH, THE ASSESSEE HAS TAKEN AS MANY AS NINE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING, SHRI VIJAY 2 HINDUSTAN CANDLE MANUFACTURING COMPANY PRIVATE LIMITED MEHTA, LD. COUNSEL FOR THE ASSESSEE ARGUED GROUND N O. 6 BY SUBMITTING THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE LD. ASSESSING OFFICER ERRED IN MAKIN G THE ADDITION OF RS.15,35,446/- AS DISALLOWED UNDER RULE 8D OF THE RULES BY CONTENDING THAT THE REMAINING GROUNDS ARE MERELY SUPPORTIVE TO GROUND NO. 6. AND FURTHER FAIL ED TO APPRECIATE THAT THE DISALLOWANCE U/S 14A IS ASSESSE D MORE THAN THE TOTAL ADMINISTRATIVE EXPENSES, WHICH ARE RS.25,96,259/- (ITA NO. 1949/MUM/2013). THE ASSESSE E HAS ALSO FILED A PAPER BOOK RUNNING INTO FIFTEEN PAGES. IT WAS ALSO CONTENDED THAT IDENTICALLY IN THE CASE OF MOTILAL O SWAL INVESTMENT ADVISERS VS ADDL. CIT (ITA NO.3010/MUM/2 012), REMANDED THE ISSUE BACK TO THE FILE OF THE ASSESSIN G OFFICER FOR REEXAMINATION, CONSEQUENTLY, REQUESTED THAT THI S GROUND MAY ALSO BE SENT TO THE FILE OF THE ASSESSING OFFIC ER. THE LD. DR THOUGH DEFENDED THE CONCLUSION DRAWN IN THE IMPU GNED ORDER BUT HAD NO OBJECTION IF THE MATTER IS REEXAMI NED AFRESH BY THE ASSESSING OFFICER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. FOR ASSESSMENT YE AR 2008- 09, THE ASSESSEE HAD INCOME FROM MANUFACTURING OF CANDLE AND ALSO FROM OTHER SOURCES. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS EXEMPT INCOME IN THE FORM OF DIVIDEND INCOME OF RS.95,44,192/- AND LONG TERM CAP ITAL GAINS OF RS.16,71,192/-. AS PER THE REVENUE, THE A SSESSEE DID NOT ESTABLISH THAT NO EXPENDITURE WAS INCURRED TO EARN 3 HINDUSTAN CANDLE MANUFACTURING COMPANY PRIVATE LIMITED THIS INCOME, THUS, HE APPLIED RULE 8D OF THE RULES AND MADE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT BEING 0. 5% OF THE INVESTMENT WHEREIN DIVIDEND INCOME WAS RECEIVED . IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER AS WHERE THE ASSESSEE CLAIMS THAT NO SUCH EXPENDITURE WAS INCURR ED, HE WAS ENTITLED TO VERIFY THE CORRECTNESS OF SUCH CLAI M. THE ASSESSEE HAS INVESTED IN SHARES AND MUTUAL FUNDS. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. COMMISS IONER OF INCOME TAX (APPEALS) WHEREIN THE CLAIM OF THE ASSES SEE WAS DULY EXAMINED AND FOUND THAT SECTION 14A OF THE ACT IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONSIDERE D THE DECISION IN THE CASE OF GODREJ & BOYCE VS DCIT 234 CTR 81 FROM THE HONBLE JURISDICTIONAL HIGH COURT AND ANOT HER DECISION OF SPECIAL BENCH IN M/S CHEMINVEST LTD. (2009) 124 TTJ (DEL.)(SB) 577 . BEFORE US, THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSING OFFICE R HAS NOT CONSIDERED THE ADMINISTRATIVE EXPENSES AND MERELY M ADE THE DISALLOWANCE IN STEREO TYPE MANNER. THE LD. COUNSE L INVITED OUR ATTENTION TO PAGE 7 OF THE PAPER-BOOK. WE ARE NOT FULLY SATISFIED WITH THE CLAIM OF EXPENSES AS ADMINISTRAT IVE EXPENSES, HOWEVER, STILL FEELS THAT KEEPING IN VIEW THE PRINCIPLE OF NATURAL JUSTICE THE CLAIM OF THE ASSES SEE MAY BE EXAMINED AFRESH. THE ASSESSING OFFICER IS EXPECTED TO CONSIDER THE EXEMPT INCOME WHICH ARISES FROM THE INVESTMENT MADE BY THE ASSESSEE AND ALSO WHETHER SU CH 4 HINDUSTAN CANDLE MANUFACTURING COMPANY PRIVATE LIMITED INVESTMENT DUE RISE TO EXEMPT INCOME. SO FAR AS IN VOKING SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL E IS CONCERNED, WE ARE SATISFIED THAT SUCH INVOCATION IS CORRECT. HOWEVER, THE ASSESSING OFFICER IS TO EXAMINE THE APPORTIONMENT OF EXPENSES. THEREFORE, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER CONSIDERING THE LATEST DECISIONS FROM HONBLE HIGH COURTS AND REWORK THE DISALLOWANCES. NEEDLESS TO M ENTION HERE THAT DUE OPPORTUNITY OF BEING HEARD BE PROVIDE D TO THE ASSESSEE WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. BOTH THESE APPEALS ARE ALLOW ED FOR STATISTICAL PURPOSES ONLY. 3. FINALLY, THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT, IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 11/11/2014. SD/- SD/- D.KARUNAKARA RAO JOGINDER SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED -11/11/2014 SHEKHAR. PS. !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. '#!$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. ) 2, ( '# ) / THE CIT(A)- 4. ) 2, / CIT 5. 34 %,*5 , '#- '5 , ) 6+ / DR, ITAT, MUMBAI 5 HINDUSTAN CANDLE MANUFACTURING COMPANY PRIVATE LIMITED 6. 7 8+ / GUARD FILE. % / BY ORDER, &3#, %, //TRUE COPY// & / %' ( (DY./ASSTT. REGISTRAR) , ) 6+ / ITAT, MUMBAI