Suryanagari Finlease Ltd., Ahmedabad V. The Income tax Officer, Ward-8(2), Ahmedabad

ITA 1954/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2350 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI N.S. SAINI, A.M. ) I.T.A. NO. 1954/AHD./2010 ASSESSMENT YEAR : 2006-2007 SURYANAGARI FINLEASE LTD., AHMEDABAD -VS.- INCOME TAX OFFICER, WARD-8(2), (PAN : AADCS 0465 P) AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH GANDHI RESPONDENT BY : SHRI K. MADHUSUDAN, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 17.02.2010 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XIV, AHMEDABAD RESTRICTING THE DISALLOWANCE UNDER SECTION 14A MADE BY THE ASSESSING OFFICER AT RS.10, 71,776/- FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF SHARE TRADING, LEASING, FINANCE AND COMMISSION BUSI NESS. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME SHOWING TOTAL INCOME OF RS.76,714/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 10.10.2008, WHEREIN HE MADE THE DISALLOWANCE UNDER SECTION 14A AMOUNTING TO RS.19,51,975/-. ON APPEAL, IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE SAID DISALLOWANCE AT RS.10,71,776/- AS PER RULE 8D OF THE INCOME TAX RULES, 1962. AGGRIEVED WI TH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US, SHRI SURESH GA NDHI, LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE CONTENDED THAT INTEREST CLAIMED BY THE ASSESSEE-COMPANY AMOUNTING TO RS.19,51,975/- IS FOR BUSINESS PURPOSE AND HENCE, T HE SAME IS ALLOWABLE. IT WAS FURTHER CONTENDED THAT NO INTEREST-BEARING FUNDS WERE INVESTED IN SHA RES AND THUS THERE WAS NO EXCESS BETWEEN THE INTEREST BEARING FUNDS AND THE AMOUNT INVESTED IN S HARES AND, THEREFORE, NO DISALLOWANCE UNDER SECTION 14A IS CALLED FOR. 2 ITA NO. 1954-AHD-2010 4. ON THE OTHER HAND, SHRI K. MADHUSUDAN, LD. SR. D .R. APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). THE LD. D.R. POINTED OUT THAT BY THE FINANCE ACT OF 2001, PARLIA MENT ENACTED SECTION 14A OF THE INCOME TAX ACT, 1961 WITH RETROSPECTIVE EFFECT FROM APRIL 1, 1 962. RULE 8D IS RETROSPECTIVE AS HELD BY THE HON'BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF ITO VS.- DAGA CAPITAL MANAGEMENT P. LTD. REPORTED IN [2009] 312 ITR (AT) 1 (MUMBAI) [SB ]. HE ACCORDINGLY CONTENDED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) BE UPHELD. 5. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. RECENTLY THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE MFG. CO. LTD. VS.- DEPUTY COMMISSIONER OF INCOME TAX & ANOTHER RE PORTED IN [2010] 328 ITR 81 (BOM.) HELD THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. IN THIS JUDGMENT, IT IS ALSO HELD THAT PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A OF THE INCOME TAX ACT, 1961. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND T O DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. FOR THIS PURPOSE, THE ASSESSING OFFICER MUST ADOPT A RE ASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. IN THAT J UDGMENT, THE HON'BLE BOMBAY HIGH COURT DIRECTED THE ASSESSING OFFICER TO ADOPT A REASONABL E BASIS FOR EFFECTING THE APPORTIONMENT. ADMITTEDLY, WHEN LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PASSED THE IMPUGNED ORDER, THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE MFG. CO. LTD. WAS NOT AVAILABLE. 6. IN VIEW OF THE FOREGOING, WE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSE SSING OFFICER WITH THE DIRECTION THAT HE WILL RE- WORK OUT THE DISALLOWANCE UNDER RULE 14A AS PER JUD GMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA) OR ANY OTHER JUDGMENT WHICH THE ASSESSEE MAY RELY IN THIS REGARD. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES AND ALL THE AVAILABLE 3 ITA NO. 1954-AHD-2010 CASE LAWS, HE WILL RE-WORK OUT THE DISALLOWANCE UND ER SECTION 14A OF I.T. ACT, 1961 AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 13.01.20 11 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 / 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.