DCIT 7(3), MUMBAI V. TIL LTD ( FORMERLY KNOWN AS THAKRAL INVESTMENT (INDIA) P.LTD), MUMBAI

ITA 2596/MUM/2013

• Counselvise Citation: 259619914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PATHADE
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.2596/MUM/2013 ( / ASSESSMENT YEAR : 2006-2007) DY. COMMISSIONER OF INCOME TAX- 7(3), ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. M/S TIL LTD., (FORMERLY KNOWN AS THAKRAL INVESTMENT (INDIA P LTD), 7, GROUND FLOOR, ATUR HOUSE, DR. A B ROAD, WORLI NAKA, MUMBAI 400018 ( / APPELLANT) .. ( !' / RESPONDENT) ./ #$ ./PAN/GIR NO. : AABCT4024F % / APPELLANT BY : SHRI PRAKASH L PATHADE !' & % /RESPONDENT BY : NONE ' & ( ) / DATE OF HEARING : 9.7.2014 *+ & ( ) /DATE OF PRONOUNCEMENT : 9.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: 2. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER DATED 3.01.2009 PASSED BY LD CIT(A)-18, MUMBAI AND IT RELATES TO TH E ASSESSMENT YEAR 2006-07. NONE APPEARED ON BEHALF OF THE ASSESSEE. HENCE, WE PROC EED TO DISPOSE OF THE APPEAL EX- PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 3. THE REVENUE IS IN APPEAL BEFORE US IN RESPE CT OF THE FOLLOWING ISSUES:- (A) DISALLOWANCE MADE U/S 14A R.W. RULE 8D (B) DISALLOWANCE MADE U/S 40A(2)(A) OF THE ACT. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTING AND TRADING IN SHARES AND SECURITIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVE D DIVIDEND INCOME. THE AO TOOK THE VIEW THAT THE PROVISIONS OF RULE 8D, WHICH WAS NOTI FIED W.E.F. 24.3.2008, ARE APPLICABLE I.T.A. NO.2596/MUM/2013 2 TO THIS YEAR ALSO AND ACCORDINGLY WORKED OUT THE DI SALLOWANCE U/S 14A OF THE ACT IN TERMS OF RULE 8D. THE AO FURTHER NOTICED THAT THE ASSESSEE CLAIMED A SUM OF RS.11,63,713/- AS DEDUCTION TOWARDS LEGAL AND PROF ESSIONAL FEE. THE AO NOTICED THAT THE ABOVE SAID SUM INCLUDED A SUM OF RS.11,25,000/- PAID TO FOLLOWING PERSONS, WHO ARE COVERED BY THE PROVISIONS OF SEC. 40A(2)(B) OF THE ACT:- MRS. REKHA KEMANI (DAUGHTER OF DIRECTOR) 3,60,000 MS. DEEPA KHEMANI (WIFE OF DIRECTOR) 2,70 ,000 CHATURVEDI FINANCIAL CONSULTANCY SERVICES (DIRECTO RS CONCERN) 4,05,000 MRS. RICHA P CHATURVEDI 90,000 THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SERVICES RENDERED BY THE ABOVE SAID PARTIES AND ALSO REQUIRED THE ASSESSEE TO PROVE THA T THE ABOVE SAID PAYMENTS ARE NOT EXCESSIVE VIS--VIS THE MARKET RATES. HOWEVER, THE DETAILS FURNISHED BY THE ASSESSEE WERE FOUND TO BE INADEQUATE BY THE AO AND ACCORDING LY, HE DISALLOWED THE ENTIRE AMOUNT OF RS.11,25,000/- BY INVOKING THE PROVISIONS OF SEC. 40A(2)(A) OF THE INCOME TAX ACT, 1961 (THE ACT). 5. IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A), BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT RENDERED I N THE CASE OF GODREJ & BOYCE MFG. CO. LTD (194 TAXMAN 203), HELD THAT THE PROVISIONS OF RULE 8D IS APPLICABLE FROM AY 2008-09 ONWARDS AND NOT TO THE YEAR UNDER CONSIDERA TION. ACCORDINGLY, HE SET ASIDE THE SAID ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO RECOMPUTE THE DISALLOWANCE THAT IS REQUIRED TO BE MADE U/S 14A OF THE ACT BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD (SUPRA). WITH REGARD TO THE DISALLOWANCE MADE U/S 40A(2)(A) OF THE ACT, THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, IN THE REMAND REPORT, THE AO EXPRESSED THE VIEW THAT THE SAID ISSUE MAY BE DECIDED ON MERITS. THE LD CIT(A) WAS CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE THAT THE AO HAS FAILED TO PROVE THAT T HE PAYMENTS MADE TO THE RELATIVES ARE EXCESSIVE IN NATURE. BEFORE LD CIT(A), THE ASS ESSEE ALSO PLACED RELIANCE ON THE FOLLOWING CASE LAW:- (A) D.C. GANDHI ASSOCIATES VS. ITO (32 ITD 285)(AH D) (B) GUJARAT ALUMINIUM EXTRUSION (P) LTD VS. ITO (3 7 TAXMAN 287)(AHD) (C) BETA NAPHTHOL (P) LTD VS. DCIT (1994)(50 TTJ ( IND) 375) (D) SHRIRAM PISTONS & RINGS LTD VS. IAC (1991)(39 TTJ (DEL) 132). ACCORDINGLY, THE LD CIT(A) DELETED THE DISALLOWANCE MADE U/S 40A(2)(A) OF THE ACT. AGGRIEVED BY THE DECISION RENDERED BY LD CIT(A), TH E REVENUE HAS FILED THIS APPEAL ON BOTH THE ISSUES CITED ABOVE. I.T.A. NO.2596/MUM/2013 3 6. WE HEARD LD D.R AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT BY INVOKING TH E PROVISIONS OF RULE 8D OF THE INCOME TAX RULES. ADMITTEDLY, THE ASSESSMENT YEAR UNDER CONSIDERATION IS AY 2006-07 AND THE RULE 8D WAS HELD TO BE APPLICABLE PROSPECTI VELY FROM ASSESSMENT YEAR 2008-09 ONWARDS ONLY BY THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (SUPRA). WE NOTICE THAT THE LD CIT(A) HAS FOLLOWED THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT AND ACCORDINGLY SET ASIDE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO COMPUTE THE DISALLOWANCE U/S 14A O F THE ACT BY FOLLOWING THE ABOVE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT. HEN CE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS DECISION ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE M ADE U/S 40A(2)(A) OF THE ACT. WE NOTICE THAT THE ASSESSING OFFICER, IN HIS REMAND RE PORT, HAS EXPRESSED THAT THE MATTER MAY BE DECIDED ON MERITS ON THE BASIS OF MATERIALS FILED BEFORE THE LD CIT(A). FURTHER, AS CONTENDED BY THE ASSESSEE BEFORE LD CIT(A), THE AO HAS NOT BROUGHT OUT ANY MATERIAL OR ANY COMPARABLE CASE ON RECORD TO SHOW THAT THE PAYMENTS MADE TO THE RELATIVES COVERED BY SEC. 40A(2)(B) OF THE ACT IS E XCESSIVE IN NATURE. ON THE CONTRARY, THE ASSESSEE HAS FURNISHED CERTAIN MATERIALS BEFORE THE LD CIT(A) AND EXPLAINED THAT THE IMPUGNED PAYMENTS ARE REASONABLE. ACCORDINGLY, THE FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION BY HOLDING THAT THERE IS NO PR OOF TO SHOW THAT THE IMPUGNED PAYMENTS ARE EXCESSIVE AND UNREASONABLE AND FURTHER THE AO HAS NOT DETERMINED THE EXCESSIVE AMOUNT, IF ANY. UNDER THESE SET OF FACT S, WE ARE OF THE VIEW THAT THE LD CIT(A) HAS DECIDED THIS ISSUE BY CORRECTLY APPRECIA TING THE LEGAL PROVISIONS AND HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION RENDER ED BY HIM ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 9TH JULY, 2014. *+ ' , -. / 0 9TH JULY, 2014 + & 2 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER I.T.A. NO.2596/MUM/2013 4 - ' MUMBAI: 9 TH JULY,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. 67 2 !(8 , ) 8 , - ' / DR, ITAT, MUMBAI CONCERNED 6. 2 9 : / GUARD FILE. ; ' / BY ORDER, TRUE COPY < # (ASSTT. REGISTRAR) ) 8 , - ' /ITAT, MUMBAI