M/s. Wizard Fincap Limited, Baroda V. The Dy.CIT.,Anand Circle, Baroda

ITA 2529/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1911 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHR I T.K. SHARMA, J.M .) I.T.A. NO. 2529/AHD./2010 ASSESSMENT YEAR : 2007-2008 M/S. WIZARD FINCAP LIMITED, ANAND -V S- DCIT, ANAND CIRCLE, ANAND (PAN : AAACW 1726A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL TALATI, A. R. RESPONDENT BY : SHRI VIMALENDU VERMA, D .R. O R D E R THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 25.06.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, BA RODA FOR THE ASSESSMENT YEAR 2007-2008. 2. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN THIS A PPEAL ARE AS UNDER: (1) THE ORDER PASSED BY THE HON'BLE CIT (A)- IV B ARODA IS BAD IN LAW AND CONTRARY TO LEGAL PRONOUNCEMENT, BE QUASHED. THE ADDITIONS /DI SALLOWANCES CONFIRMED BY CIT(A) ARE UNWARRANTED AND HENCE THE SAME BE DELETED NOW. (2) THE HON'BLE CIT (A) - IV BARODA HAS ERRED IN C ONFIRMING THE DISALLOWANCE OF INTEREST OF RS. 508569/- U/S. 14/A OF THE ACT. THE HON'BLE CIT(A) - IV, BARODA HAS FAILED TO APPRECIATE THE FACTS AND LEGAL PRONOUNCEMENTS SUBM ITTED DURING THE COURSE OF HEARING AND IN TURN WRONGLY CONFIRMED THE ACTION OF AO FOR INVOKING PROVISIONS OF SECTION 14A R.W. RULE 6D OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED TH AT THE HON'BLE CIT (A) - IV, BARODA HAS ERRED IN NOT ALLOWING THE SET OFF OF INTEREST RECE IVED AGAINST INTEREST PAID AND THEREBY NOT ACCEPTED THE CONTENTION OF YOUR APPELLANT TO TAX T HE AMOUNT BY NETTING OFF OF INTEREST. (3) THE HON'BLE CIT (A) - IV BARODA HAS ERRED IN N OT APPRECIATING YOUR APPELLANT'S CONTENTION THAT DISALLOWANCE CAN BE MADE U/S. 14A OF THE ACT, ONLY IF THERE IS ACTUAL NEXUS 2 ITA NO. 2529-AHD-2010 BETWEEN TAX FREE INCOME AND EXPENDITURE. SINCE THE AO HAS NOT BROUGHT ANY EVIDENCE ESTABLISHING THE NEXUS, THE HON'BLE CIT (A) - IV B ARODA HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST. THE SAME BEING INCORRECT AND UNCALLED FOR, BE DIRECTED TO BE DELETED NOW. 3. AT THE TIME OF HEARING, SHRI SUNIL TALATI, A.R. APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT SHARES ARE HELD AS STOCK-IN-TRADE. T HEREFORE, NO DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT, 1961 READ WITH RULE 8 OF THE INCOM E TAX RULES IS CALLED FOR. HE ALSO SUBMITTED THAT PROVISIONS OF RULE 8D WERE NOTIFIED W.E.F. 24. 03.2008 AND THESE ARE NOT RETROSPECTIVE IN NATURE AND SHALL APPLY FROM THE ASSESSMENT YEAR 200 8-09. IN THIS CONTEXT, THE LD. COUNSEL RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT REPORTED IN 328 ITR 81, WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF RULE 8D ARE NOT RETROSPECTIVE IN NATURE AND WAS APPLIED W.E.F. ASSESSMENT YEAR 2008-09. ON THIS GROUND, IT WAS CONTENDED THAT DISALLOWANCE UNDER SE CTION 14A MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE DELETED. 4. SHRI VIMALENDU VERMA, D.R., RELYING ON THE JUDGE MENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT ( SUPRA ), POINTED OUT THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 BUT FOR EARLIER PERIOD DISALLOWANCE HAS TO BE DETERMINED ON REASONABLE BASIS. HE ACCORDINGLY CONT ENDED THAT DISALLOWANCE SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IN THE IMPUGNED ORDER, IS FAIR AND REASONABLE AND THE SAME BE UPHELD. 5. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HON'BLE BOMBAY HIGH COURT, IN THE CASE O F GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT REPORTED IN 328 ITR 81, HELD THAT THE PROV ISIONS OF RULE 8D HAVE BEEN NOTIFIED W.E.F. 24.03.2008 AND ARE NOT RETROSPECTIVE IN NATURE AND SHALL APPLY W.E.F. ASSESSMENT YEAR 2008-09. THE DIVIDEND INCOME HAS BEEN CLAIMED BY THE ASSESSE E EXEMPT. IN VIEW OF THIS, I RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WI TH THE DIRECTION THAT THE ASSESSING OFFICER MAY RE-COMPUTE THE DISALLOWANCE, IF ANY, AS PER THE RAT IO OF THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURIN G CO. LTD. VS- DCIT ( SUPRA ). IN THIS CASE, 3 ITA NO. 2529-AHD-2010 I MAY ALSO MENTION THAT THE ASSESSING OFFICER IS AT LIBERTY TO CONSIDER ANY OTHER DECISION AVAILABLE WHICH THE ASSESSEE MAY RELY IN THIS REGAR D. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 .03.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 09 /03/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.