LIBRA TECHCON P.LTD, MUMBAI V. ITO 1(2)(2), MUMBAI

ITA 2086/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71252 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , & ./I.T.A. NO.2086/MUM/2012 ( / ASSESSMENT YEAR:2007-08) M/S LIBRA TECHCON PVT.LTD., 2-F COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI-400020 / VS. INCOME TAX OFFICER 1(2)(2), MUMBAI. ./ ./PAN/GIR NO. : AABCL0877G ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : MS.MRUGAKSHI JOSHI /RESPONDENT BY : SHRI SURENDRA KUMAR ' / DATE OF HEARING : 24.9.2013 ' /DATE OF PRONOUNCEMENT : 27.9.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST ORDER OF LD. CIT(A) DATED 5.1.2012. 2. ONLY ISSUE INVOLVED IS AS TO WHETHER LD. CIT(A) IS JUSTIFIED TO CONFIRM THE ACTION OF AO OF MAKING DISALLOWANCE OF RS.7,02,552/- U/S 14A OF THE INCOME TAX ACT, 1961 (THE ACT) ON EARNING TAX FREE INCOME. 3. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT THE ASSESSEE IS ENGAGED IN PROVIDING CONSULTANCY SERVICES AND ENGINEERING SOLUTION, INCLUDING DESIGN , TECHNICAL KNOW HOW, LICENSING PRODUCT MANAGEMENT, TURNKEY PROJECTS AND TECHNICAL SERVICES. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED DIV IDEND INCOME OF RS.16,19,456/- WHICH IS EXEMPT FROM TAX UNDER THE ACT. ASSESSEE MADE ESTIMATED DISALLOWANCE U/S 14A OF THE ACT AT THE RATE OF 5% OF THE DIVIDEND A MOUNT RECEIVED WHICH WORKED OUT TO I.T.A. NO.2086/MUM/2012 2 RS.80,973/-. AO DID NOT AGREE WITH THE DISALLOWAN CE MADE BY ASSESSEE AND BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962 WOR KED OUT THE DISALLOWANCE OF RS.7,02,552/- CONSIDERING THE AVERAGE VALUE OF INV ESTMENT OF RS.14,05,10,398/- AND HAS APPLIED 0.5% ON ACCOUNT OF ADMINISTRATIVE EXPEN SES. SINCE THE ASSESSEE OF ITS OWN MADE DISALLOWANCE OF RS.80,973/-, THE AO MADE BALA NCE DISALLOWANCE OF RS.6,21,579/- (RS.702522-RS.80973) U/S 14A OF THE ACT. BEING AGG RIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. LD. CIT(A) AGREED WITH THE CONTENTION OF ASSE SSEE THAT IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF GODREJ & BOYCE MFG CO LTD VS DCIT (2010) 328 ITR 81 (BOM) RULE 8D DOES NOT APPLY TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007-08 BUT STAT ED THAT THE AO HAS RIGHTLY APPLIED REASONABLE METHOD AND WORKED OUT THE DISALLOWANCE U /S 14A OF THE ACT AND THUS, CONFIRMED THE DISALLOWANCE OF RS.6,21,579/- AFTER ADJUSTING DISALLOWANCE OF RS.80,973/- ALREADY MADE BY ASSESSEE. HENCE, THE A SSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD.AR SUBMITTED THA T THE DISALLOWANCE AS MADE BY AO AND CONFIRMED BY LD. CIT(A) IS EXCESSIVE. LD. A R SUBMITTED THAT INVESTMENT WAS MADE ONLY FOR A PERIOD OF 33 DAYS DURING THE YEAR A ND NO EXPENSES WERE INCURRED BY ASSESSEE FOR MAKING THE SAID INVESTMENT OF RS.24,8 5,20,795/- WHICH YIELDED DIVIDEND INCOME BY ASSESSEE. LD. AR SUBMITTED THAT THERE WA S NO INTEREST EXPENDITURE INCURRED BY ASSESSEE FOR THE SAID INVESTMENT MADE WHICH YIEL DED TAX FREE INCOME OF RS.16,19,456/-. LD. AR SUBMITTED THAT THE DISALLOWA NCE IS EXCESSIVE CONSIDERING THE FACTS OF THE CASE. 6. LD. DR RELIED ON THE ORDER OF LD. CIT(A) AND SUB MITTED THAT LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY AO BY ADOPTING THE REASONABLE METHOD AND HAS NOT APPLIED RULE 8D OF THE INCOME TAX RULES, 1962 AS CONTENDED BY ASSESSEE IN THE GROUNDS OF APPEAL. 7. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE AGREE WITH THE LD. DR THAT RULE 8D HAS NOT BEEN APPLIED BY LD. CIT (A) THOUGH THE AO COMPUTED THE DISALLOWANCE MADE U/S 14A BY APPLYING RULE 8D OF T HE RULES. IT IS ALSO FACT THAT RULE 8D IS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER C ONSIDERATION. WE ALSO OBSERVE THAT THERE IS NO INTEREST BEARING FUNDS USED BY ASSESS EE FOR THE PURPOSE OF MAKING I.T.A. NO.2086/MUM/2012 3 INVESTMENT IN THE MUTUAL FUNDS WHICH HAS YIELDED DI VIDEND INCOME OF RS.16,19,456/- TO THE ASSESSEE. IT IS ALSO OBSERVED THAT SUCH INVEST MENT WAS MADE ONLY FOR 33 DAYS DURING THE YEAR. WE ALSO OBSERVED THAT THE ASSESSE E SUO-MOTO MADE DISALLOWANCE OF RS.80,973/- BEING 5% OF THE AMOUNT RECEIVED BY ASS ESSEE. CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IT WILL BE REASONABLE DISALLOW A SUM OF RS.1,25,000/- FOR THE PURPOSE OF SECTION 14A OF THE ACT. SINCE THE ASSESSEE HAS MADE DISALLOWANCE OF RS.80,973, WE HOLD THAT OVER AND A BOVE THE SAID DISALLOWANCE, THE BALANCE DISALLOWANCE OF RS.44,027/- IS TO BE MADE FOR THE PURPOSE OF SECTION 14A OF THE ACT. HENCE, GROUND OF APPEAL TAKEN BY ASSESSEE IS A LLOWED IN PART BY RESTRICTING DISALLOWANCE TO RS.44,027/- AS AGAINST RS.6,21,579/ - CONFIRMED BY LD. CIT(A). THEREFORE, GROUND OF APPEAL TAKEN BY ASSESSEE IS AL LOWED IN PART . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27 TH SEPTEMBER, 2013 ( * + 27 TH SEPTEMBER, 2013 SD SD ( /SANJAY ARORA) ( . . 1 /B.R.MITTAL) / ACCOUNTANT MEMBER ( / JUDICIAL MEMBER MUMBAI; 27 TH SEPTEMBER, 2013 . . ./ SRL , SR. PS ) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 3 5 , ' 5 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , / ITAT, MUMBAI