DCIT 4(1), MUMBAI V. SHRI ASHOK KUMAR DAMANI, MUMBAI

ITA 2153/MUM/2011

• Counselvise Citation: 215319914 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , / . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER . / ITA NO. 1050/MUM/2011 ! ! ! ! / ASSESSMENT YEAR 2007-08 SHRI ASHOK KUMAR DAMANI, 1 ST FLOOR, SURYA MAHAL BLDG., 5, BURJORI BHARUCHA MARG, FOR, MUMBAI 400 023 / VS. THE DCIT, RANGE 4(1), ROOM NO.640, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ' ./ #$ ./ PAN/GIR NO. : AADBD 1845K ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) . / ITA NO. 2153/MUM/2011 ! ! ! ! / ASSESSMENT YEAR 2007-08 THE DCIT, RANGE 4(1), ROOM NO.640, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 / VS. SHRI ASHOK KUMAR DAMANI, 1 ST FLOOR, SURYA MAHAL BLDG., 5, BURJORI BHARUCHA MARG, FOR, MUMBAI 400 023 ' ./ #$ ./ PAN/GIR NO. : AABPD 1845K ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) ASSESSEE BY : SHRI HIRO RAI REVENUE BY : SHRI M.L.PERUMAL ( )* / DATE OF HEARING : 24/02/2014 +,! ( )* / DATE OF PRONOUNCEMENT : 24/02/2014 / O R D E R . / ITA NO.1050&2153/MUM/2011 ! ! ! ! / ASSESSMENT YEAR 2007-08 2 PER I.P.BANSAL,J.M: THESE CROSS APPEALS ARE DIRECTED AGAINST ORDER DA TED 10/12/2010 PASSED BY LD. CIT(A)-10, MUMBAI FOR THE ASSESSMENT YEAR 20 07-08. THE GROUNDS OF APPEAL READ AS UNDER: GROUNDS OF ASSESSEES APPEAL: 1. THE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPE NSES BY ATTRIBUTING THE SAME TOWARDS EARNING OF EXEMPT INCOME U/S.14A BE DELETED . 2. WITHOUT PREJUDICE, THE FUTURE OF STOCK IN TRADE NOT BE TREATED AS INVESTMENTS FOR THE PURPOSE OF CALCULATION OF DISALLOWANCE U/S.14A. GROUNDS OF REVENUES APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.43,63,190/- MA DE U/S.14A READ WITH RULE 8D OF THE INCOME TAX ACT BY ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE SET ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 2. SINCE COMMON ISSUE WAS INVOLVED AND THESE APPEAL S WERE ARGUED TOGETHER BY BOTH THE PARTIES, FOR THE SAKE OF CONVE NIENCE THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. THE ONLY ISSUE R AISED IN THE PRESENT APPEAL IS REGARDING DISALLOWANCE MADE UNDER SECTION 14A O F THE INCOME TAX ACT, 1961 (THE ACT). THE ASSESSEE HAS EARNED TAX FREE DIVIDE ND INCOME OF RS.81,24,340/-. THE AO APPLIED RULE 8-D AND CALCULATED THE DISALLOW ANCE AT A SUM OF RS.43,63,190/-, WHICH COMPRISE OF TWO COMPONENTS, O NE OF THE EXPENDITURE BY WAY OF INTEREST AMOUNTING TO RS.27,80,520/- AND ANO THER COMPONENT ON ACCOUNT OF A SUM EQUAL TO % OF THE AVERAGE VALU E OF INVESTMENT AMOUNTING TO RS.15,82,670/-. THE ADDITION WAS AGITATED IN TH E APPEAL FILED BEFORE LD. CIT(A). IT WAS SUBMITTED BEFORE HIM THAT IN VIEW OF ENOUGH SUFFICIENT OWN FUNDS NO EXPENSES COULD BE ATTRIBUTED ON ACCOUNT O F INTEREST EXPENSES INCURRED FOR MAKING INVESTMENT IN THE ASSETS ON WHI CH TAX FREE INCOME HAS BEEN EARNED. THIS CONTENTION OF THE ASESSEE HAS BE EN ACCEPTED BY LD. CIT(A) . / ITA NO.1050&2153/MUM/2011 ! ! ! ! / ASSESSMENT YEAR 2007-08 3 AND ADDITION ON ACCOUNT OF INTEREST AMOUNTING TO R S.27,80,520/- IS DELETED. HOWEVER, LD. CIT(A) HAS UPHELD THE OTHER COMPONENT OF RS.15,82,670/-. THE DEPARTMENT IS AGGRIEVED WITH THE DELETION OF A SUM OF RS.27,80,520/- AND ASSESSEE IN ITS APPEAL IS AGGRIEVED BY THE SUSTAIN ED DISALLOWANCE OF A SUM OF RS.15,82,670/- 3. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY L D. AR THAT WHAT HAS BEEN DONE BY LD. CIT(A) IS THAT HE HAS UPHELD ONE PART O F THE CALCULATION UNDER RULE 8-D. HE SUBMITTED THAT FOR THE ASSESSMENT YEAR UND ER CONSIDERATION RULE -8D CANNOT BE APPLIED. HE SUBMITTED THAT IT WILL BE A PPROPRIATE IF THE MATTER IS RESTORED TO THE FILE OF AO WITH A DIRECTION TO RE- ADJUDICATE THIS ISSUE IN THE LIGHT OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CAS E OF GODREJ & BOCYE MFG. COMPANY LTD ,. VS. DCIT, 328 ITR 81(BOM). HE SUBM ITTED THAT THOUGH LD. CIT(A) HAS CONSIDERED THE DECISION OF BOMBAY HIGH C OURT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. (SUPRA) BUT ULTIMATELY HE HAS UPHELD THE DISALLOWANCE WITH REFERENCE TO RULE 8-D. 4. ARGUING THE APPEAL OF THE REVENUE, IT WAS SUBMIT TED BY LD. DR THAT AO WAS RIGHT IN MAKING DISALLOWANCE WITH REFERENCE TO RULE-8D. HE SUBMITTED THAT THE DISALLOWANCE MADE BY AO SHOULD BE UPHELD. GIVING REPLY TO THE ARGUMENTS OF LD. AR , LD. DR RELIED UPON THE ORDER PASSED BY LD. AO. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. AFTER CAREFUL CONSIDERATION OF TH E ISSUE, WE FIND THAT RULE 8D CANNOT BE APPLIED FOR THE ASSESSMENT YEAR 2007-08 ACCORDING TO THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY (SUPRA). WHILE GRANTING THE PAR T RELIEF TO THE ASSESSEE, LD. CIT(A) HAS UPHELD THE DISALLOWANCE ONLY IN ACCORDA NCE WITH RULE 8D. SUCH ACTION OF LD. CIT(A) IS NOT IN ACCORDANCE WITH THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT . THEREFORE, ACCEPTING TH E REQUEST OF LD. AR, WE . / ITA NO.1050&2153/MUM/2011 ! ! ! ! / ASSESSMENT YEAR 2007-08 4 RESTORE THIS ISSUE IN ITS ENTIRETY TO THE FILE OF A O WITH A DIRECTION TO RE- ADJUDICATE THE DISALLOWANCE AS PER AFOREMENTIONED D ECISION OF HONBELE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MF G. COMPANY LTD. (SUPRA). WE DIRECT ACCORDINGLY. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, BOTH TH E APPEALS SHOULD BE CONSIDERED TO BE ALLOWED AS THE MATTER HAS BEEN RE STORED BACK IN ITS ENTIRETY TO THE FILE OF AO. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2014 ( +,! - . / 24/02/2014 , ( 0 SD/- SD/- ( . . / R.C.SHARMA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 24/02/2014 ( (( ( &)1 &)1 &)1 &)1 21!) 21!) 21!) 21!) / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 140 &) , , / DR, ITAT, MUMBAI 6. 05 6 / GUARD FILE. / BY ORDER, '1) &) //TRUE COPY// 7 77 7 / 8 8 8 8 # # # # (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS