M/s. Gillette Group India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 267/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58917 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PALLAVI DINODIA CAS
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.267 267 267 267/DEL/201 /DEL/201 /DEL/201 /DEL/2012 22 2 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 200 200 200 2008 88 8- -- -09 0909 09 M/S GILLETTE GROUP INDIA M/S GILLETTE GROUP INDIA M/S GILLETTE GROUP INDIA M/S GILLETTE GROUP INDIA PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., (NOW KNOWN AS WELLA (NOW KNOWN AS WELLA (NOW KNOWN AS WELLA (NOW KNOWN AS WELLA HAIRCOSM HAIRCOSM HAIRCOSM HAIRCOSMETICS INDIA PVT.LTD.), ETICS INDIA PVT.LTD.), ETICS INDIA PVT.LTD.), ETICS INDIA PVT.LTD.), C/O JAIKUMAR TEJWANI & CO., C/O JAIKUMAR TEJWANI & CO., C/O JAIKUMAR TEJWANI & CO., C/O JAIKUMAR TEJWANI & CO., CHARTERED ACCOUNTANTS, CHARTERED ACCOUNTANTS, CHARTERED ACCOUNTANTS, CHARTERED ACCOUNTANTS, B BB B- -- -50, EAST OF KAILASH, 50, EAST OF KAILASH, 50, EAST OF KAILASH, 50, EAST OF KAILASH, TOP FLOOR, TOP FLOOR, TOP FLOOR, TOP FLOOR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACG2468D. PAN : AAACG2468D. PAN : AAACG2468D. PAN : AAACG2468D. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), 12(1), 12(1), 12(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADEEP DINODIA, SHRI R.K.KAPOOR & MS.PALLAVI DINODIA, CAS. RESPONDENT BY : SHRI ALOK SINGH, SR.DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE O RDER OF LEARNED CIT(A)-VIII, NEW DELHI DATED 4 TH NOVEMBER, 2011 FOR THE AY 2008-09. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO RESTRICT THE DISALLOWANCE U/S 14A REA D WITH RULE 8D TO RS.1,78,83,842/- AS AGAINST THE DISALLOWANCE OF RS.2,37,59,757/- MADE BY THE AO ON PROPORTIONATE BA SIS, ON WHOLLY ERRONEOUS, ILLEGAL AND UNTENABLE GROUNDS. ITA-267/DEL/2012 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT FO R A.Y. 2008-09, THE DISALLOWANCE U/S 14A HAS TO BE WORKED OUT ONLY IN ACCORDANCE WITH RULE 8D OF THE I.T.RULES. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE ARE VARIOUS FAC TUAL ERRORS IN COMPUTING THE DISALLOWANCE AS PER RULE 8D. HOWEVER , HE IS NOT ARGUING IN DETAIL WITH REGARD TO THOSE ERRORS BUT, HIS ARGUMENT IS LIMITED TO THE FACT THAT THE DISALLOWANCE CANNOT EX CEED THE EXPENDITURE CLAIMED BY THE ASSESSEE. HE STATED THA T TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUN T IS ONLY ` 49,04,028/- WHILE THE ASSESSING OFFICER DISALLOWED ` 2,37,59,757/-. THAT APART FROM DIVIDEND INCOME, THE ASSESSEE HAS O THER INCOME TO THE EXTENT OF ` 97,04,935/-. THEREFORE, PART OF THE TOTAL EXPENDIT URE INCURRED BY THE ASSESSEE IS CERTAINLY ATTRIBUTABLE TO EARNING OF OTHER INCOME. HOWEVER, EVEN IF IT IS PRESUMED THAT THE E NTIRE EXPENDITURE WAS INCURRED FOR EARNING OF DIVIDEND INCOME, THEN A LSO, THE DISALLOWANCE CANNOT BE MADE MORE THAN THE EXPENDITU RE ACTUALLY CLAIMED BY THE ASSESSEE. HE STATED THAT SECTION 14 A PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. RULE 8D IS ONLY A METHOD FOR DETERMINING SUCH EXPENDITURE. THEREFORE, IN ANY CA SE, WHAT HAS NOT BEEN CLAIMED BY THE ASSESSEE CANNOT BE DISALLOWED. HE STATED THAT THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE WAS ONLY ` 49,04,028/- AND, THEREFORE, EVEN IF IT IS PRESUMED THAT THE ENT IRE EXPENDITURE WAS FOR EARNING OF DIVIDEND INCOME, THE DISALLOWANCE CA NNOT EXCEED ` 49,04,028/-. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. ITA-267/DEL/2012 3 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SECTION 14A READS AS UNDER:- EXPENDITUR EXPENDITUR EXPENDITUR EXPENDITURE EE E INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME TOTAL INCOME TOTAL INCOME TOTAL INCOME. 14A. [(1) FOR THE PURPOSES OF COMPUTING THE TOTAL I NCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED I N RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.] [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSES SING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT :] [PROVIDED PROVIDED PROVIDED PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECT ION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREADY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ITA-267/DEL/2012 4 ASSESSEE UNDER SECTION 154, FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1 ST DAY OF APRIL, 2001.] 6. FROM THE ABOVE, IT IS EVIDENT THAT AS PER SUB-SE CTION (1) OF SECTION 14A, NO DEDUCTION IS TO BE ALLOWED IN RESPE CT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF TOTAL INCOME. SUB-SECTION (2) OF SECTION 1 4A PROVIDES THE PROCEDURE FOR DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER. THE BOARD HAS ALSO PRESCRIBED RULE 8D FOR DETERMINING THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. THUS, THE DISALLOWANCE CAN BE MADE UNDER SUB-SECTIO N (1) FOR THE EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME. IN THE CASE UNDER APPEAL BEFORE US, FROM THE PERUSAL OF THE ASSESSEE S PROFIT & LOSS ACCOUNT, IT IS EVIDENT THAT THE TOTAL EXPENDITURE I NCURRED WAS ` 49,04,028/- ONLY. THUS, THE ASSESSEE CLAIMED THE D EDUCTION FOR THE EXPENDITURE OF ` 49,04,028/- WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE DISALLOWANCE CANNOT EXCEED THE EXPEND ITURE ACTUALLY CLAIMED BY THE ASSESSEE. WE, THEREFORE, ACCEPT THE ASSESSEES CONTENTION THAT THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) IN EXCESS OF TOTAL EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT WAS UNJUSTIFIED. ACCORDIN GLY, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE I.E. ` 49,04,028/-. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2012. SD/- SD/- ( (( (A.D.JA A.D.JA A.D.JA A.D.JAIN ININ IN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 23.03.2012 VK. ITA-267/DEL/2012 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR