DILIP G. PIRAMAL, MUMBAI V. ITO 7(3)(4), MUMBAI

ITA 2075/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3794 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR DR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI ! . '# , % &'( & BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM & ./I.T.A. NO.2075/M/2012 ( ) * +* / ASSESSMENT YEAR :2007-2008) MR. DILIP G. PIRAMAL , 61, PIRAMAL HOUSE, POCHKANWALA ROAD, WORLI, MUMBAI - 400 025. / VS. INCOME TAX OFFICER-7(3)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (, % & ./PAN :AEAPP 7149 H ( ,- /APPELLANT) .. ( ./,- / RESPONDENT) ,- 0 1 & / APPELLANT BY : SHRI J.P. BAIRAGRA ./,- 0 1 & / RESPONDENT BY : SHRI MANOJ KUMAR, DR & 0 2% /DATE OF HEARING :10.4.2013 3+ 0 2% /DATE OF PRONOUNCEMENT : 15.5.2013 '4 '4 '4 '4 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 29.3.2012 IS A GAINST THE ORDER OF CIT (A)- 13, MUMBAI DATED 17.11.2011 FOR THE ASSESSMENT YEAR 2007-2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE ONLY EFFECTIV E GROUND WHICH READS AS UNDER: THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 3,44,663/- UNDER SECTION 14A OF THE INCOME TAX ACT READ WITH RULE-8D OF THE INC OME TAX RULES. 3. AT THE OUTSET, SHRI J.P. BAIRAGRA, LD COUNSEL FO R THE ASSESSEE MENTIONED THE SINGULAR ISSUE BROUGHT BEFORE THE TRIBUNAL RELATES TO THE DISALLOWANCE OF RS. 3,44,663/- U/S 14A OF THE ACT READ WITH RULE-8D OF THE IT RULES. HE FURTHER MENTIONED THAT THE ASSESSMENT YEAR UNDER CONSIDERAT ION IS NOT COVERED BY THE PROVISIONS OF RULE-8D OF THE INCOME TAX RULES, 196 2. AS PER THE COUNSEL WHO RELIED 2 ON THE JUDGMENT IN THE CASE OF GODREJ AND BOYCE MFG CO LTD, BEFORE ESTIMATING THE DISALLOWABLE EXPENDITURE, THE DEPARTMENT IS UNDER O BLIGATION TO REJECT THE CRITERIA ADOPTED BY THE ASSESSEE WITH REGARD TO THE QUANTIFI CATION OF EXPENDITURE RELATABLE TO THE EXEMPT INCOME WHICH FORM PART OF THE TOTAL INCO ME OF THE ASSESSEE. ALTHOUGH, NOTHING WAS DEBITED TO THE P & L A/C AS RELATABLE E XPENDITURE, BEFORE THE AUTHORITIES, ASSESSEE HAS OFFERED 5% OF THE DIVIDEN D INCOME WHICH SHOULD BE DISALLOWED U/S 14A OF THE ACT. THE ASSESSEES CLAI M HAS BEEN REJECTED AND BOTH AO AND THE CIT (A) APPLIED THE PROVISIONS OF RULE-8D O F THE IT RULES, 1962 AND QUANTIFIED THE DISALLOWABLE EXPENDITURE AT RS. 3,44 ,663/-. IN THIS REGARD, LD COUNSEL MENTIONED THAT NO EXPENDITURE HAS ACTUALLY INCURRED WHICH IS RELATABLE TO THE EARNING OF THE EXEMPT INCOME. IT IS ALSO A FACT THAT THE REV ENUE AUTHORITIES HAVE NOT REJECTED THE ABOVE CLAIM BY MENTIONING THE REASONS IN WRITING. THEY HAVE MECHANICALLY APPLIED THE SAID RULE-8D IN SUBSISTENC E WITHOUT REJECTING THE OFFER OF THE ASSESSEE. AT THE END, LD COUNSEL MENTIONED THA T THE TRIBUNAL MAY TAKE A LENIENT VIEW IN THIS REGARD AND QUANTIFY THE REASON ABLE DISALLOWANCE. 4. ON THE OTHER HAND, LD DR RELIED ON THE PROVISION S OF SECTION 14A(3) OF THE ACT AND MENTIONED THAT THAT THESE PROVISIONS ARE REQUIR ED TO BE APPLIED EVEN IF THERE IS NO EXPENDITURE INCURRED FOR EARNING OF THE EXEMPT I NCOME. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL PLACED BEFORE US. IT I S A FACT THAT THE ASSESSEE WAS OFFERED 5% OF DIVIDEND INCOME AS INCOME RELATABLE T O THE EARNING OF THE EXEMPT INCOME. IT IS ALSO A FACT THAT THE REVENUE AUTHORIT IES HAVE NOT REJECTED THE OFFER OF THE ASSESSEE BY PASSING ANY SPEAKING ORDER ON THE I SSUE. FURTHER, IT IS A FACT THAT THE PROVISIONS OF SUB-SECTION (3) OF SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF EXPENDITURE EVEN IF NO EXPENDITURE WAS DIRECTLY INC URRED FOR EARNING OF SUCH INCOME. NEVERTHELESS, THE PROVISIONS OF RULE-8D OF I T RULE S 1962 ARE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. THUS, THE SAID RULE-8D C ANNOT BE INVOKED TO THE INSTANT ASSESSMENT YEAR. IT IS AN AGREED POSITION THAT THE A SSESSEE WAS OFFERED 5% OF THE DIVIDEND INCOME AND THE DIVIDEND INCOME IS RS. 7,34 ,887/-. CONSIDERING THE PECULIAR FACTS OF THIS CASE IE NON-INCURRING OF ANY EXPENDIT URE; NON-APPLICABILITY OF THE RULE- 3 8D; REQUIREMENT OF DISALLOWANCE VIDE SUB-SECTION (3 ) OF SECTION 14A AND NON- REJECTION OF THE ASSESSEES OFFER OF DISALLOWANCE @ 5% OF DIVIDEND INCOME, WE ARE OF THE OPINION THAT QUANTIFYING THE DISALLOWANCE RELAT ABLE TO THE EXPENDITURE AT RS. 50,000/-, WHICH IS MORE THAN SAID 5%, ON AD-HOC BAS IS MUST MEET THE BOTH ENDS OF THE JUSTICE. ACCORDINGLY, GROUND RAISED BY THE ASS ESSEE IS PARTLY ALLOWED . 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED. 5 26 ) *52 0 74 ( 8 2 0 92 : ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2013. . '4 0 3+ % ;'6 15/5/2013 0 < SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) /VICE PRESIDENT % &'( / ACCOUNTANT MEMBER MUMBAI; ;' 15/5/2013. . ) . & ./ OKK , SR. PS '4 0 .)27= >=+2 /COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. = @< .)2) , , / DR, ITAT, MUMBAI 6.