M/S. PATANI SECURITIES PVT. LTD., MUMBAI V. ITO 4(2)(2), MUMBAI

ITA 2118/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7571 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI V.D. RAO , J.M. ITA NO. : 2118/MUM/2011 ASSESSMENT YEAR : 2007-08 M/S. PATANI SECURITIES PVT. LTD. CRECENT CHAMBERS TAMARIND LANE, FORT MUMBAI-400 001. PAN NO: AAACP 7182 P INCOME TAX OFFICER WARD 4(2)(2) MUMBAI-400 020. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI M. RAJAN DATE OF HEARING : 21.3.2012 DATE OF PRONOUNCEMENT : 21.3.2012 O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 12.1.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DISALLOWANCE O F EXPENSES UNDER SECTION 14A RELATING TO THE EXEMPT INCOME. 2. FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT P ROCEEDINGS NOTED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 23,67,569/- AND LONG TERM CAPITAL GAINS OF RS.3,58,097/- WHICH WER E EXEMPT FROM ITA NO.2118/M/2011 A.Y.07-08 2 TAX. THE AO THEREFORE DISALLOWED THE EXPENSES RELATIN G TO EXEMPT INCOME UNDER SECTION 14A WHICH WERE COMPUTED AS PER RULE 8D WHICH CAME BE RS.7,30,205/-. IN APPEAL CIT(A) FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF GODREJ AND BOY CE MFG. CO. VS. DCIT (328 ITR 81), HELD THAT RULE 8D WAS NOT APPL ICABLE FOR THE RELEVANT YEAR AND THE EXPENSES HAD TO BE CALCULATED ON A REASONABLE BASIS. CIT(A) FURTHER HELD THAT DISALLOWANCE OF RS.7,3 0,205/- WAS QUITE REASONABLE. AGGRIEVED BY SAID DECISION, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING OF APPEAL, NO ONE APPEARE D ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE, THOUGH NOTICE OF HEARIN G HAD BEEN GIVEN WELL IN ADVANCE NOR ANY ADJOURNMENT APPLICATION HAD BEEN RECEIVED. WE, THEREFORE, PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE L D. DR WHO PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING DISALL OWANCE OF EXPENSES RELATING TO EXEMPT INCOME UNDER SECTION 14A OF THE IT ACT. UNDER THE PROVISIONS OF SECTION 14(2) AND 14(3), EXPEN SES RELATING TO EXEMPT INCOME ARE REQUIRED TO BE COMPUTED AS PER METHO D PRESCRIBED BY THE GOVERNMENT. THE GOVERNMENT HAS SINCE NOTIFIED THE METHOD IN ITA NO.2118/M/2011 A.Y.07-08 3 THE FORM OF RULE 8D W.E.F. 1.4.2008. THE HONBLE BO MBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. VS. DCIT (328 ITR 81) HAVE HELD THAT RULE 8D WAS APPLICABLE ONLY FROM ASSESSMENT YE AR 2008-09 AND IN RESPECT OF PRIOR YEARS, DISALLOWANCE HAD TO BE MA DE ON A REASONABLE BASIS, OF BOTH DIRECT AND INDIRECT EXPENSES AFT ER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. THOUGH CIT(A) H AS NOT APPLIED RULE 8D, HE HAS NOT GIVEN ANY BASIS AS TO HOW THE DISAL LOWANCE MADE BY AO UNDER RULE 8D WAS REASONABLE. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE O F AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF GODREJ AND BOYCE M FG. CO. VS. DCIT (SUPRA), AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.3.2012. SD/- SD/- (V.D. RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 21.3.2012. JV. ITA NO.2118/M/2011 A.Y.07-08 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.