The ACIT, Circle-4, Ahmedabad V. E-Infochips Limited, Ahmedabad

ITA 2036/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1311 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER THE ACIT, CIRCLE - 4, AHMEDABAD (APPELLANT) VS E - INFOCHIPS LTD, 11 - A/B, CHANDRA COLONY, CG ROAD, CG ROAD, NAVRANGPURA, AHMEDABAD PAN: AACCS1310E (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : S H RI K. MAD HUSUDAN , SR. D . R. ASSESSEE BY: S MT. URVASHI SHODHAN , A.R. DATE OF HEARING : 22 - 06 - 2 016 DATE OF PRONOUNCEMENT : 30 - 06 - 2 016 / ORDER P ER BENCH : - THIS REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION FOR A.Y. 2007 - 08 , AR ISE FROM ORDER OF THE CIT(A) - VIII, AHMEDABAD DATED 29 - 06 - 2012, IN APPEAL NO. CIT(A) - VIII/DCIT/CIR. 4/541/10 - 1 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2036 & CO NO. 215 / A HD /20 12 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 2236 & CO NO. 215 /AHD /2012 A.Y. 20 07 - 08 PAGE NO ACIT VS. E - INFOCHIPS LTD 2 2. WE COME TO RIVAL PLEADINGS FIRST. THE REVENUE S SOLE SUBSTANTIVE GRIEVANCE ASSAILS CORRECTNESS OF THE LOWER APPELLATE ORDER RESTRICTING SECTION 14A R.W. RULE 8D DISALLOWANCE OF RS. 12,15,573/ - MADE BY THE ASSESSING OFFICER TO RS. 1,72,312/ - @ 4% OF THE ASSESSEE S EXEMPT INCOME FROM DIVIDEND AND MUTUAL FUNDS TOTALING TO RS. 43,07,794/ - . 3. THE ASSESSEE IN TURN RAISES TWO SUBSTANTIVE GROUNDS. THE FIRST ONE SEEKS TO DELETE THE ENTIRE SECTION 14A DISALLOWANCE OF RS. 1,72,312/ - AS INDICATED HER EINABOVE IN REVENUE S APPEAL. ITS LATTER SUBSTANTIVE GROUNDS AVERS THAT THE CIT(A) HAS ERRED ON FACTS AND LAW REVISING ITS SECTION 10B DEDUCTION CLAIM ON THE BASIS OF TURNOVER AS AGAINST THE ASSESSING OFFICER S ACTION MAKING THE VERY DISALLOWANCE OF RS. 8 3,22,258/ - . ITS FURTHER ARGUMENT IN SUPPORT THEREOF IS THAT CIT(A) OUGHT TO HAVE ACCEPTED ITS IMPUGNED DEDUCTION CLAIM AMOUNTING TO RS. 4,97,73,807/ - . 4. WE COME TO FIRST ISSUE OF SECTION 14A R.W RULE 8D DISALLOWANCE. THERE IS NO DISPUTE ABOUT THE FACT THAT T HE ASSESSEE HAS EARNED THE ABOV E STATED EXEMPT INCOME FROM DIVIDEND AND MUTUAL FUNDS. THE ASSESSING OFFICER INVOKED RULE 8D IN ASSESSMENT ORDER DATED 29 - 12 - 2010 AND DISALLOWED ADMINISTRATIVE EXPENDITURE @ 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT COMIN G TO RS. 12,15,573/ - IN QUESTION. THE CIT(A) REVERSES ASSESSING OFFICER S ACTION ON THE GROUND THAT RULE 8D IS NOT APPLICABLE IN ASSESSMENT YEARS EARLIER TO 2008 - 09. HE QUOTES HON BLE BOMBAY HIGH COURT I.T.A NO. 2236 & CO NO. 215 /AHD /2012 A.Y. 20 07 - 08 PAGE NO ACIT VS. E - INFOCHIPS LTD 3 DECISION IN GODREJ AND BOYC E VS. DCIT (2010) 43 DTR 177 (BO M). THEREAFTER, THE CIT(A) PROCEEDS TO FOLLOW REASONABLE METHOD IN COMPUTING SECTION 14A DISALLOWANCE @ 4% OF THE EXEMPT INCOME COMING TO RS. 1,72,312/ - . THIS LEAVES BOTH THE PARTIES AGGRIEVED TO THE EXTENT INDICATED HEREINABOVE. 5 . WE HAVE HEAR D RIVAL CONTENTI ONS. THE REVENUE SEEKS TO REST O RE ASSESSING OFFICER S ACTION IN INVOKING RULE 8D. WE APPLY THE RATIO ABOVE STATED CASE LAW TO CONCLUDE THAT THIS RULE DOES NOT APPLY IN THE IMPUGNED ASSESSMENT YEAR. THE REVENUE FAILS TO POINT OUT ANY EXCE PTION ON FACTS OR LAW. COMING TO ASSESSEE S ARGUMENTS, WE FIND THAT A CO - ORDINATE BENCH IN ITA 421 / AHD/2012 DECIDED ON 31 - 12 - 2013 IN ASSESSMENT YEAR 2006 - 07 HAS DELETED AN IDENTICAL DISALLOWANCE. IT HOWEVER DOES NOT TAKE INTO CONSIDERATION THE SETTLED LE GAL PROPOSITION THAT THE IMPUGNED DISALLOWANCE HAS TO BE COMPUTED ON REAS ONABLE METHOD. LD. AUTHORIZED R EPRESENTATIVE FAIRLY AGREES WITH THIS PREPOSITION. WE DEEM IT APPROPRIATE IN T HESE PECULIAR FACTS AND CIRCUMSTANCES THAT A LUMP SUM AMOUNT OF RS. 50,0 00/ - INSTEAD OF RS. 1,72,312/ - IN QUESTION WOULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. THE ASSESSEE S FIRST SUBSTANTIVE GROUND PARTLY SUCCEEDED. REVENUE S APPEAL ITA 2036/AHD/2012 FAILS. 6 . WE COME TO ASSESSEE S LATTER GROUND OF SECTION 10B D EDUCTION (SU PRA) BOTH THE LEARNED REPRESENTATIVES INFORM THAT THIS TRIBUNAL HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER IN IDENTICAL BACKDROP OF FACTS. WE FOLLOW THE VERY COURSE OF ACTION AS IN THE I.T.A NO. 2236 & CO NO. 215 /AHD /2012 A.Y. 20 07 - 08 PAGE NO ACIT VS. E - INFOCHIPS LTD 4 IMMEDIATELY PRECEDING ASSESSMENT YEAR. THIS ASSESSEE S GROUND SHALL BE RE - ADJUDI CATED ALONG WITH THAT IN THE PRECEDING ASSESSMENT YEAR BY THE LEARNED ASSESSING OFFICER AS PER LAW. THIS GROUND SUCCEEDS FOR STATISTICAL PURPOSES. 7 . THE REVENUE S APPEAL ITA 2036/AHD/2012 IS DISMISSED. ASSESSEE S CO 215/AHD/2012 IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 06 - 201 6 SD/ - SD/ - ( MANISH BORAD ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30 /06 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,