RELIANCE COMMUNICATIONS, NAVI MUMBAI V. ADDL CIT, 7(2), MUMBAI

ITA 2425/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48654 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 29-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Assessee Lawyers: ARVIND DALAL
• Keywords: Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.M. JAGTAP AND SHRI R.S. PADVEKAR, JM I.T.A.NO.2425/MUM/2010 ASSESSMENT YEAR: 2001-02 M/S. RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD., H BLOCK, DAKC, THANE BELAPUR ROAD, KOPARKHAIRNE, NAVI MUMBAI 400 710. PAN: AACCS 2157 H VS. THE ADDL. COMMISSIONER OF INCOME- TAX-7(2), AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARVIND DALAL RESPONDENT BY : DR. B. SENTHIL KUMAR O R D E R PER P.M. JAGTAP, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-13, MU MBAI DATED 22.01.2010. 2. THE SOLITARY ISSUE THAT IS ARISING FOR OUR CONSI DERATION OUT OF THIS APPEAL RELATES TO THE DISALLOWANCE OF RS.13,64,01,571/- MA DE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) UNDER SECTION 14A R EAD WITH RULE 8D. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF PROVIDING INTER-NET SERVICES, TELE-COMM UNICATION INFRASTRUCTURE FACILITIES AND TRADING IN TELECOMMUNICATION DEVICES AND ACCESS ORIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31 .01.2005, DECLARING THE TOTAL INCOME AT NIL AS PER THE NORMAL PROVISIONS OF THE A CT AND A BOOK PROFIT OF RS. 17,77,17,854/- AS PER THE PROVISIONS OF SECTION 115 JB. FROM THE BALANCE SHEET FILED BY THE ASSESSEE ALONG WITH THE SAID RETURN, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAS MADE CONSIDERABLE INVESTMENT IN S HARES, THE DIVIDEND INCOME OF WHICH IS EXEMPT FROM TAX. ALTHOUGH NO SUCH DIVIDEND INCOME WAS ACTUALLY RECEIVED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, TH E ASSESSING OFFICER HELD THAT THE EXPENDITURE INCURRED IN CONNECTION WITH MAKING OF T HE SAID INVESTMENT IN SHARES WAS ITA NO.2425/M/2010 RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. 2 LIABLE TO BE DISALLOWED U/S.14A. ACCORDINGLY, HE WO RKED OUT SUCH EXPENSES LIABLE TO BE DISALLOWED AT RS.13,64,01,171/- BY APPLYING RULE 8D OF THE INCOME-TAX RULES, 1962 AND DISALLOWED THE SAME U/S.14A OF THE ACT, IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 31.12.2008 . ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSES SING OFFICER. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE HAS PREFE RRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WHILE DEALING WITH A SIMILAR ISSUE INVOLVED IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DCIT (328 IT R 81), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D OF THE INCOME-TAX RULES , 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM THE ASSESSMENT YEAR 2008-09 . THE SAID RULE THUS IS NOT APPLICABLE IN THE PRESENT CASE INVOLVING ASSESSMENT YEAR 2005-06. AS FURTHER HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODR EJ AND BOYCE MFG. CO. LTD. V. DCIT (SUPRA) THE QUANTUM OF DISALLOWANCE U/S.14A F OR THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008-09 HAS TO BE WORKED OUT BY AD OPTING SOME REASONABLE METHOD. KEEPING IN VIEW OF THE SAID JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DCIT (SUPRA), WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND RESTORE TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE QU ANTUM OF EXPENSES TO BE DISALLOWED U/S.14A BY ADOPTING SOME REASONABLE METH OD. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF APRIL, 2011. SD. SD. (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 27 TH APRIL, 2011. ITA NO.2425/M/2010 RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. 3 KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-7, MUMBAI. 4. THE CIT(A)-13, MUMBAI 5. THE DR D BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI