HINDUSTAN COMPOSITES LTD, MUMBAI V. DCIT 10(2), MUMBAI

ITA 2085/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49643 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 11-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BALKRISHNA MENON
• Assessee Lawyers: R S GORADIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2085/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. HINDUSTAN COMPOSITES LTD., B-11, PARAGON CONDOMINIUM, PANDURANG BUDHKAR MARG, WORLI MUMBAI -400 013 ....... APPELLANT VS DCIT -10(2), ROOM NO.432, 4TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAACH 0973 N APPELLANT BY: SHRI R.S. GORADIA RESPONDENT BY: SHRI BALKRISHNA MENON DATE OF HEARING: 11.07.2011 DATE OF PRONOUNCEMENT: 29.07.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDE R OF THE LD. CIT (A) -21 MUMBAI DATED 28.01.2010 FOR THE A.Y. 20 06-07. GROUND NO.1 IS IN RESPECT OF DISALLOWANCE MADE BY THE A.O. U/S.14A R.W. RULE 8D AND THEREBY MAKING THE ADDITION WHILE DETERMININ G THE TOTAL INCOME OF THE ASSESSEE. 2. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE COMPANY IS ENGAGED IN THE MANUFACTURING AND MARKETING OF FIBRE BASED COMPOSITE MATERIAL. IT WAS NOTICED BY THE A.O. THA T THE ASSESSEE HAS ITA 2085/MUM/2010 M/S. HINDUSTAN COMPOSITES LTD. 2 EARNED DIVIDEND INCOME OF ` 5,01,656/- THAT WAS FROM THE INVESTMENT IN THE SHARES IN THE GROUP COMPANIES. IN THE OPINI ON OF THE A.O. THE ASSESSEE SHOULD HAVE DISALLOWED EXPENDITURE ATTRIBU TABLE FOR EARNING DIVIDEND INCOME. THE ASSESSEE RESISTED ACTION OF T HE A.O. BY TAKING THE CONTENTION THAT NO BORROWED FUNDS ARE USED FOR THE INVESTMENT IN THE SHARES. THE A.O. DID NOT ACCEPT THE PLEA OF TH E ASSESSEE THAT THE INVESTMENTS ARE FROM THE SURPLUS FUNDS. THE A.O. MA DE THE DISALLOWANCE OUT OF THE TOTAL EXPENDITURE WHICH WAS WORKED OUT AT ` 13,82,926/-. THE ASSESSEE CHALLENGED THE SAID DISA LLOWANCE BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS. NOW, THE ASSE SSEE IS IN APPEAL BEFORE US. 3. BOTH THE PARTIES AGREED THAT NOW THE ISSUE OF DI SALLOWANCE HAS TO GO BACK TO THE A.O. FOR FRESH ADJUDICATION AFTER CONSIDERING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF DCIT VS. GODREJ AND BOYCEE MFG. CO. LTD. 328 ITR 81 (BOM ). IN THE CASE OF GODREJ AND BOYCEE MFG. CO. LTD. (SUPRA) THE HONBLE HIGH COURT HAS EXAMINED THE APPLICABILITY OF RULE 8D AS WELL AS TH E SCOPE OF SECTION 14A. IT IS HELD THAT RULE 8D IS NOT APPLICABLE RET ROSPECTIVELY. WE, ACCORDINGLY, RESTORE THE ISSUE WHETHER THE DISALLOW ANCE IS REQUIRED TO BE MADE U/S.14A FOR FRESH ADJUDICATION TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE SAME DE NOVO IN THE CASE OF GODREJ AND BOYCEE MFG. CO. LTD. (SUPRA) THE A.O. SHOULD GIVE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 4. GROUND NO.2 IS NOT PRESSED BY THE LD. COUNSEL, T HE SAME IS DISMISSED AS NOT PRESSED. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR THE STATISTICAL PURPOSES. ITA 2085/MUM/2010 M/S. HINDUSTAN COMPOSITES LTD. 3 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9TH JULY 2011. SD/- SD/- ( T.R. SOOD ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 29TH JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)21, MUMBAI. 4) THE CIT-M.C.-X, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 2085/MUM/2010 M/S. HINDUSTAN COMPOSITES LTD. 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 25.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.07.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER