SRF Polymers Ltd, Fatehabad V. DCIT, New Delhi

ITA 2967/DEL/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69415 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDDI SRIVASTAVA
• Assessee Lawyers: AJAY VOHARA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-2967/DEL/2009 (ASSESSMENT YEAR-2005-06) SRF POLYMERS LTD. VS. DCIT BLOCK C, SECTOR 45 CIRCLE-9(1) GURGAON-122003 C.R. BUILDING NEW DELHI. PAN: AAFCS9521A (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. AJAY VOHARA, ADV. REVENUE BY:-SMT. NIDDI SRIVASTAVA, SR. DR ORDER PER RAJPAL YADAV JM. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT (A) DATED 16 TH OF MARCH 2009 PASSED FOR A.Y. 2005-06. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT INCONSONANCE WITH RULE 8 OF ITAT RULES, THEY ARE DESCRIPTATIVE A ND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF ASSESSEE IS THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE U/S 14A R.W.R. 8D OF THE INCOME TAX ACT. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28 TH OCTOBER 2005 DECLARING TOTAL INCOME OF RS.39694256 2/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE U/S 143(2) DATED 3 RD APRIL 2006 WAS ISSUED AND SERVED UPON THE ASSESSEE . DURING SCRUTINY OF ACCOUNTS, IT REVEALED TO THE AO THAT AS SESSEE HAS MADE INVESTMENT WHICH WOULD RESULT DIVIDEND INCOME. THER EFORE, HE CONFRONTED THE ASSESSEE TO EXPLAIN, AS TO WHY PROPORTIONATE EX PENSES U/S 14A SHOULD NOT BE DISALLOWED ON THE DIVIDEND INCOME. THE LD. AO HA S MADE AN ADDITION OF RS.16125388/- U/S 14A. 4. ON APPEAL, THE LD. CIT (A) HAS OBSERVED THAT AO HAS TO DISALLOW THE EXPENSES AS PER SECTION 14A R.W.R. 8D. SHE PUT RELI ANCE UPON THE ORDER OF ITAT RENDERED IN THE CASE OF ITO VS. DAGA CAPITAL M ANAGEMENT (P) LTD. REPORTED IN 119 TTJ PAGE 289. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT THOUGH THE INVESTMENT WAS MADE IN AY 2005-06, IT CO NTINUED IN THE SUBSEQUENT YEARS. IN AY 2006-07 THE SIMILAR DISALLO WANCE WAS MADE, THE ITAT IN ITA NO.745/DEL/2010 HAS HELD THAT ORDER OF THE SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT (P) LTD . WAS NOT APPROVED BY THE HONBLE BOMBAY HIGH COURT. THE HONBLE BOMBAY H IGH COURT IN THE CASE OF GODREJ & BOYCE MFG. PVT. LTD. REPORTED IN 4 3 DTR PAGE 177 (BOM.) HAS HELD THAT RULE 8D IS NOT RETROSPECTIVE AND HENC E IT CANNOT BE APPLIED IN 3 AY 2006-07. THE ITAT HAS SET ASIDE THE ORDER OF THE CIT (A) AND RESTORED THIS ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATIO N. THE ORDER OF THE ITAT, WAS CHALLENGED BY THE REVENUE IN APPEAL BEFORE THE HONBLE HIGH COURT VIDE ITA NO. 720/2011. THE HONBLE HIGH COURT HAS DISPOS ED OFF THE APPEAL VIDE ORDER DATED 2.12.2011, THE LD. COUNSEL FOR THE ASSE SSEE PLACED ON RECORD, COPY OF THE HONBLE HIGH COURTS DECISION. HE SUBMI TTED THAT HONBLE HIGH COURT HAS UPHELD THE REMITTANCE OF THIS ISSUE TO TH E FILE OF THE AO FOR RE- ADJUDICATION. THE AO IS REQUIRED TO ADJUDICATE THE ISSUE AS PER THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT REPORTED IN 347 ITR PAGE 272. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT LD. AO HAS GIVEN EFFECT TO T HE JUDGMENT OF HONBLE HIGH COURT VIDE HIS ORDER DATED 30.4.2012, HE PLACE D ON RECORD COPY OF THE AOS ORDER. 6. ON THE STRENGTH ALL THESE DETAILS, HE SUBMITTED THAT THIS ISSUE BE REMITTED BACK TO THE FILE OF THE AO FOR RE-ADJUDICA TION IN THE LIGHT OF HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF MAXOPP I NVESTMENT LTD. 7. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER O F CIT (A). 8. WE HAVE DULY CONSIDERED RIVAL CONTENTION AND GON E THROUGH THE RECORD CAREFULLY. THE HONBLE DELHI HIGH COURT IN THE ASSE SSEES OWN CASE FOR AY 2006-07 HAS HELD THAT RULE 8D IS NOT RETROSPECTIVE IN NATURE. IT WAS BROUGHT ON THE STATUTE BOOK W.E.F. 24 TH MARCH 2008. THEREFORE IT IS APPLICABLE FROM 4 AY 2008-09. THE HONBLE HIGH COURT HAS REMITTED THE ISSUE WITH REGARD TO QUANTIFICATION OF ACTUAL EXPENDITURE, DIRECT OR IND IRECT BY KEEPING IN MIND THE PROCEDURE LAID DOWN IN THE CASE OF MAXOPP INVES TMENT. THE QUESTIONS AND THE OBSERVATION OF HONBLE HIGH COURT READ AS U NDER: (I) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT RULE 8D OF THE INCOME TAX RUL ES, 1962 INSERTED BY THE INCOME TAX (5 TH AMENDMENT) RULES, 2008 WITH EFFECT FROM 24 TH MARCH, 2008 WAS PROCEDURAL IN NATURE AND HENCE WOULD APPLY RETROSPECTIVELY TO ALL PENDING PROCEEDINGS? (II) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT NO EXPENDITURE CAN BE ALLOCAT ED TOWARDS EARNING OF EXEMPT INCOME UNDER SECTION 14A COUNSEL FOR THE PARTIES STATE THAT THE MATTER IS CO VERED BY THE DECISION OF THIS COURT DATED 18 TH NOVEMBER, 2011 IN ITA NO.687/2009 TITLED MAXOPP INVESTMENT LTD. VS. COMMISSIONER OF INCOME TAX, NEW DELHI AND OTHER CASES. IN THE SAID DECISION, IT HAS BEEN HELD THAT RULE 8 D IS NOT RETROSPECTIVE. ACCORDINGLY, IT WILL NOT APPL Y TO THE CASE OF THE RESPONDENT FOR THE ASSESSMENT YEAR IN QUESTION. QUESTION NO.(I) IS ACCORDINGLY ANSWERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. AS FAR AS THE QUESTION NO.(II) IS CONCERNED, FOLLOWING THE DECISION AND REASONING GIVEN IN MAXOP P INVESTMENT LTD. (SUPRA), WE REMIT THE MATTER TO THE 5 ASSESSING OFFICER TO DECIDE THE QUESTION OF ACTUAL EXPENDITURE, DIRECT OR INDIRECT, IN TERMS OF THE SA ID DECISION. QUESTION NO.2 IS ANSWERED ACCORDINGLY. THE APPEAL I S DISPOSED OF. 9. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE H IGH COURT IN THE ASSESSEES OWN CASE IN SUBSEQUENT YEAR. WE ALLOW TH E PRESENT APPEAL AND REMIT THE ISSUE REGARDING QUANTIFICATION OF DISALLO WANCE U/S 14A TO THE AO. THE LD. AO SHALL VERIFY THE DETAILS, KEEPING IN MIN D THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP AND THEREAFT ER MADE THE DISALLOWANCE, IF ANY. 10. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/10/2013. SD/- SD/- ( T. S. KAPOOR ) (RAJP AL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 24/10/2013 *AK VERMA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR