ALCHEMIC FINANCIAL SERVICES LIMITED, MUMBAI V. ACIT 10(3), MUMBAI

ITA 3071/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8089 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K NAYAK
• Keywords: Earning of tax free income
• Section: 143(3)

Judgement Text

I.T.A NO.3071/ MUM/2010 ALCHEMIC FINANCIAL SERVICES LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.3071/ MUM/2010 ASSESSMENT YEAR: 2007-08 ALCHEMIC FINANCIAL SERVICES LIMITED .. APPELLA NT 2 ND FLOOR, UDYOG KSHETRA, GOREGAON, LINK ROAD, MULUND (W). MUMBAI-80 PA NO.AAACA 0948 C VS INCOME TAX OFFICER 10(3) ,. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: DEEPESH CHHEDA, FOR THE APPELLANT A.K.NAYAK, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 4 TH MARCH, 2010, IN THE MATTER OF ASSESSMENT UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08. 2. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE DISALLOW ANCE OF RS.21,04,985 U/S.14A BY APPLYING RULE 8D. 3. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS SHOWN DIVIDEND INCOME AMOUNTING TO RS.4,91,110 AND CLAIMED THE SAME AS EX EMPT FROM TAX AND ALSO LONG TERM CAPITAL GAIN OF ` .1,55,15,122 WHICH WAS CLAIMED AS EXEMPT FROM TAX U NDER SECTION 10(38). THE ASSESSING OFFICER ALSO NOTED THAT ALTHOUGH THE ASSESSEE HAS CLAIMED INCOME FROM DIVIDEND EXEMPT, BUT HAS NOT MADE PROPORTIONATE DIS ALLOWANCE FOR EXPENDITURE INCURRED TO I.T.A NO.3071/ MUM/2010 ALCHEMIC FINANCIAL SERVICES LIMITED 2 EARN EXEMPT INCOME. IN THIS BACKDROP, THE ASSESSING OFFICER APPLIED RULE 8D AND COMPUTED THE DISALLOWANCE OF RS.21,04,985 U/S.14A R.W. RULE 8D AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT (A), WHO FOLLOWING THE DECISION OF THE ITAT MUMBAI IN THE CASE OF DAGA CAPITAL AND MANAGEMENT(119 TTJ 289), WHEREIN, IT WAS HELD THAT RULE 8D IS RETROSPECTIVE, APPROVED THE ACTION OF THE AO DISALLOWING A SUM OF RS. 21,04,985 . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO T HE APPLICABLE LEGAL POSITION. 5. LEARNED REPRESENTATIVES AGREE THAT SO FAR AS THE QUESTION OF RULE 8D IS CONCERNED, THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESEE B Y THE HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81), WHEREIN, IT HAS BEEN HELD THAT RULE 8D OF THE INCOME TAX RULES, 19 62 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008-09. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CASE IS 2007-08. THE HONBLE HIGH COURT HAS HELD THAT A REASONABLE DISA LLOWANCE FOR EXPENSES INCURRED IN EARNING DIVIDEND INCOME IS NEVERTHELESS TO BE COMPUTED BY T HE AO. IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ BOYCE MFG CO. LTD (SUPRA) AND AS AGREED TO BY THE PARTIES, WE REMIT THE ISSUE TO THE FILE OF THE AO TO RE-COMPUTE THE DISALLOWANCE U/S.14A IN THE LIGHT OF THE LAW LAID D OWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE MFG CO. LTD (SUPR A). 6. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2011 SD/- (R.V.EASWAR) PRESIDENT SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 17 TH MARCH, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),22, MUMBAI 4. COMMISSIONER OF INCOME TAX, 10 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.3071/ MUM/2010 ALCHEMIC FINANCIAL SERVICES LIMITED 3 I.T.A NO.3071/ MUM/2010 ALCHEMIC FINANCIAL SERVICES LIMITED 4