M/s Shri Ram Global Enterprises Ltd., New Delhi V. JCIT, New Delhi

ITA 3001/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58548 (ITAT-DELHI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: RAJNEESH AGGARWAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER ITA NO.3001/DEL/2011 ASSESSMENT YEAR : 2007-08 SHRI RAM GLOBAL ENTERPRISES LTD., UGF, NBC PLACE, BISHMA PITAMAH MARG, LODHI ROAD, NEW DELHI. PAN : AAACD6846Q VS. JCIT, RANGE-8, CR BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJNEESH AGGARWAL, CA REVENUE BY : MRS. ANUSHA KHURANA, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT (A) DATED 5 TH APRIL, 2011 FOR ASSESSMENT YEAR 2007-08. 2. THE GRIEVANCE OF THE ASSESSEE IN THE PRESENT APPEAL I S REGARDING SUSTAINED DISALLOWANCE OF ` 12,71,622/- BEING 10% OF T HE DIVIDEND INCOME OF ` 1,27,16,222/- UNDER THE PROVISIONS OF SEC TION 14A OF THE ACT. 3. THE LD. ASSESSING OFFICER HAS RESORTED TO RULE 8D WHIL E CALCULATING THE DISALLOWANCE U/S 14A IN RESPECT OF EXE MPTED DIVIDEND INCOME OF ` 1,27,16,222/- AT A SUM OF ` 16,02,548/-. AGGRIEVED, THE ITA NO.3001/DEL/2011 2 ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) WHERE IT WA S CONTENDED THAT DISALLOWANCE COULD NOT BE MADE WITH REFERENCE T O RULE 8D AS RULE 8D COULD NOT BE APPLIED WITH RESPECT TO ASSESSMENT YEAR 2007-08. REFERENCE WAS MADE TO THE VARIOUS DECISIONS OF THE TRIB UNAL AND ALSO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. PVT. LTD. REPORTED IN 43 DTR 171. CONSID ERING THESE SUBMISSIONS OF THE ASSESSEE LEARNED CIT (A) HAS HELD THAT TH OUGH RULE 8D COULD NOT BE INVOKED BEFORE ASSESSMENT YEAR 2008-09, BUT, HE OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENDITURE FOR E ARNING SUCH EXEMPTED INCOME AND BY OBSERVING THE FACTS OF THE CASE , HE HAS EXPRESSED THE OPINION THAT IT WILL MEET THE END OF JU STICE IF THE DISALLOWANCE IS RESTRICTED TO 10% OF THE DIVIDEND INCO ME AND, IN THIS MANNER, LEARNED CIT (A) HAS SUSTAINED THE DISALLOWANCE TO THE EXTENT OF ` 12,71,622/- BY GIVING THE RELIEF TO THE ASSESSEE O F A SUM OF ` 3,30,926/-. THE ASSESSEE IS STILL AGGRIEVED AND HAS RAISED VARIOUS GROUNDS OF APPEAL AGITATING THE AFORESAID SUSTAINED ADD ITION OF ` 12,71,622/-. 4. AT THE TIME OF HEARING, AFTER NARRATING THE FACT S, IT IS THE CASE OF THE LEARNED AR THAT LEARNED CIT (A) HAS COMMITTED AN ERROR IN RESTRICTING THE DISALLOWANCE TO 10% OF THE DIVIDEND I NCOME WHICH IS MERELY ON THE BASIS OF ESTIMATE. HE, HOWEVER, SUBMITTE D THAT NOW JURISDICTIONAL HIGH COURT IN THE CASE OF MAX OPP INVE STMENT LTD. VS. CIT 203 TAXMAN 364 (DEL), HAS HELD THAT FOR PRE-RULE 8D PERIOD, WHENEVER THE ISSUE OF SECTION 14A ARISES BEFORE AN ASSESSING OFFICER , HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF T HE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO T HE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT AND IF HE IS SATISFIED ON AN OBJECTIVE ANALYSIS AND FOR COGENT REASON S THAT AMOUNT OF SUCH EXPENDITURE AS CLAIMED BY THE ASSESSEE IS NOT CORR ECT, HE IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ON THE BASIS OF ITA NO.3001/DEL/2011 3 A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. HE, THEREFORE, SUBMITTED THAT IT WOULD BE PROPER IF THE MATTER IS RE STORED BACK TO THE FILE OF ASSESSING OFFICER TO RE-ADJUDICATE THE DISALLOWA NCE IN THE LIGHT OF THE AFOREMENTIONED DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE MAX OPP INVESTMENT LTD. VS. CIT (SUPRA). 5. ON THE OTHER HAND, THE LEARNED DR, RELYING UPON THE ORDER OF CIT (A), PLEADED THAT THE DISALLOWANCE HAS RIGHTLY BEEN SU STAINED BY LEARNED CIT (A) TO THE EXTENT OF 10% OF THE DIVIDEN D INCOME AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. NOW, SINCE THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THIS ISSUE IN THE CASE OF MAX OPP INVESTMENT LTD. VS. CIT 203 TAXMAN 364 (DEL), THE MATTER REQUI RES RE- CONSIDERATION AT THE LEVEL OF ASSESSING OFFICER TO BE DE CIDED IN ACCORDANCE WITH THE OBSERVATIONS OF THEIR LORDSHIPS IN THE SAID DECISION. IN THE SAID DECISION, IT HAS BEEN HELD THAT EVEN FOR THE PRE- RULE 8D PERIOD, WHENEVER THE ISSUE OF SECTION 14A ARI SES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCU RRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCO ME UNDER THE ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BE EN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TH E TOTAL INCOME, THE ASSESSING OFFICER WILL HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CASE THE ASSESSING OFFICER IS SATISFIED WITH THE CLAIM OF T HE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, A S THE CASE MAY BE, THE ASSESSING OFFICER IS TO ASCERTAIN THE CLAIM OF THE ASSE SSEE IN SO FAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CO NCERNED. IN SUCH EVENTUALITY, THE ASSESSING OFFICER CANNOT EMBARK UP ON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR THE PURPOSES OF ITA NO.3001/DEL/2011 4 SECTION 14A(1). IN CASE, THE ASSESSING OFFICER IS NOT, O N THE BASIS OF OBJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASO NABLE OPPORTUNITY, SATISFIED WITH THE CORRECTNESS OF THE CLAI M OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STATE THE REASON S FOR DOING SO. HAVING DONE SO, THE ASSESSING OFFICER WILL HAVE TO DETER MINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HE IS REQUIRED TO DO SO ON THE BASIS OF REASONABLE AND ACCEPTABLE METHOD OF APPOR TIONMENT. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF ASSESSING O FFICER TO RE- DETERMINE THE DISALLOWANCE AS PER THE AFOREMENTIONED DECISION OF HONBLE JURISDICTIONAL HIGH COURT. 7. IN THE RESULT, FOR STATISTICAL PURPOSES THE APPEAL FI LED BY THE ASSESSEE IS TREATED TO BE ALLOWED IN THE MANNER AFORESAID . THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.201 2. SD/- SD/- [B.K. HALDAR] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 07.02.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES