ASST CIT CEN CIR 41, MUMBAI V. PURSHOTTAM G. BUDHWANI, MUMBAI

ITA 2326/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84624 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURMU KH SINGH H PURSWANI
• Assessee Lawyers: NEIL PHILIP
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.2468/MUM/2013 ( / ASSESSMENT YEAR :2007-08) SHRI PURSHOTTAM G BUDHWANI, B-2, HIMALAYA SOCIETY, MILIND NAGAR, ASALFA, GHATKOPAR (W), MUMBAI-400084 / VS. ASSTT.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -41, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) .. ( ! / RESPONDENT) ./ I.T.A. NO.2326/MUM/2013 ( / ASSESSMENT YEAR :2007-08) ASSTT.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -41, ROOM NO.655, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. SHRI PURSHOTTAM G BUDHWANI, B-2, HIMALAYA SOCIETY, MILIND NAGAR, ASALFA, GHATKOPAR (W), MUMBAI-400084 ( / APPELLANT) .. ( ! / RESPONDENT) ./ #$ ./ PAN/GIRNO.:ADGP8380B % / ASSESSEE BY : SHRI GURMU KH SINGH H PURSWANI ! & % /RESPONDENT BY : SHRI NEIL PHILIP ' ( & ) * / DATE OF HEARING : 30.12.2014 +, & ) * /DATE OF PRONOUNCEMENT : 30.12.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER DATED 19.12.2012 PASSED BY THE LD. CIT(A) AND THEY RELATE TO THE ASS ESSMENT YEAR 2007-08. ITA NO.2468/M/13 AND 2326/M/13. 2 2. BOTH THE PARTIES ARE AGGRIEVED BY THE DECISION O F THE LD.CIT(A) WITH REGARD TO THE DISALLOWANCE MADE UNDER SECTION 14A OF THE I NCOME TAX ACTS, 1961 (THE ACT. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICE THAT THE ASSESSEE HAD RECEIVED A DIVIDEND INCOME OF RS.3,69, 079/- AND CLAIMED THE SAME AS EXEMPT. THE AO NOTICED THAT THE ASSESSEE DI D NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT AND HENCE HE REOPEN ED THE ASSESSMENT. THEREAFTER, THE AO COMPLETED THE ASSESSMENT BY COMP UTING THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES, 1962 (THE RUL ES) R.W.S.14A OF THE ACT AT RS.24,95,518/- AND ACCORDINGLY DISALLOWED THE SAME. 4. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE CONT ENDED BEFORE THE LD. CIT(A) THAT THE PROVISIONS OF RULE 8D SHALL BE APPL ICABLE PROSPECTIVELY FROM ASSESSMENT YEAR 2008-09 ONWARDS ONLY AND IN THIS RE GARD, HE TOOK SUPPORT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT R ENDERED IN THE CASE OF GODREJ AND BOYCE MFG CO.LTD V/S DCIT (2010) (328 ITR 81)(B OM). SINCE THE INSTANT ASSESSMENT YEAR IS AY 2007-08, THE LD. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF RULE 8D FOR MAKING D ISALLOWANCE U/S 14A FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, HE DIRECTED THE AO TO RE-DETERMINE THE DISALLOWANCE AFTER AFFORDING OPPORTUNITY TO THE ASS ESSEE OF BEING HEARD. 5. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN HOLDING THAT THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE TO TH E CURRENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007-08. HOWEVER, WE DO NOT FIND A NY MERIT IN THE APPEAL OF THE REVENUE, SINCE THE LD. CIT(A) HAS FOLLOWED THE BINDING DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG CO.LTD (SUPRA). ITA NO.2468/M/13 AND 2326/M/13. 3 6. WITH REGARD TO THE APPEAL FILED BY THE ASSESSEE , THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HIMSELF HAS WORKED OUT THE DISALLOWANCE U/S 14A OF THE ACT IN RESPECT OF THE INTEREST EXPEN DITURE AT RS.11,24,177/- AND DID NOT CLAIM THE SAME AS EXPENDITURE. HE SUBMITT ED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE OF RS.53,16,962/-, BU T CLAIMED A SUM OF RS.41,92,785/- ONLY IN THE PROFIT AND LOSS ACCOUNT . THE ASSESSEE HAD DEBITED THE BALANCE AMOUNT OF RS.11,24,177/- TO HIS CAPITAL ACCOUNT WITH THE NARRATION THAT IT RELATES TO THE INVESTMENT. ACCORDINGLY, HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING FURTHER DISALLOWANCE OVER AND A BOVE THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE. WE AGREE WITH THE SAI D SUBMISSIONS OF LD A.R. ACCORDINGLY, WE HOLD THAT THERE IS NO REQUIREMENT O F MAKING ANY FURTHER DISALLOWANCE OUT OF INTEREST EXPENDITURE. 7. HOWEVER, WHEN IT WAS POINTED OUT THAT THE AS SESSEE DID NOT MAKE ANY DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES, THE LD . AR SUBMITTED THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT R ENDERED IN THE CASE OF CIT V/S M/S GODREJ AGROVET LTD IN INCOME TAX APPEAL NO.934 OF 2011, DATED 8.01.2013, MAY BE FOLLOWED IN THE INSTANT CASE ALSO. WE HAVE GONE THROUGH THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF M/S GODREJ AGROVET LTD (SUPRA) AND WE NOTICE THAT THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE DISALLOWANCE MAY BE MADE 2% OF THE EXEMPTED INCOME . RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIG H COURT RENDERED IN THE CASE OF M/S GODREJ AGROVET LTD (SUPRA), WE DIRECT THE AO TO MAKE DISALLOWANCE OF 2% OF THE EXEMPTED INCOME TOWARDS ADMINISTRATIVE EXPE NSES. THE ORDER OF LD. CIT(A) STANDS MODIFIED ACCORDINGLY. ITA NO.2468/M/13 AND 2326/M/13. 4 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN CO URT ON 30-12- 2014. +, ' - ./ 0 1 30.12.2014 , & 2( 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER . ' ( MUMBAI: 30-12-2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ' 5) ( ) / THE CIT(A)- CONCERNED 4. ' 5) / CIT CONCERNED 5. 6. 67 2 )8 , * 8 , . ' ( / DR, ITAT, MUMBAI CONCERNED 2 9 : ( / GUARD FILE. ; ' / BY ORDER, TRUE COPY < # (ASSTT. REGISTRAR) * 8 , . ' ( /ITAT, MUMBAI