DCIT 1(1), MUMBAI V. THE EMERALD CO. LTD, MUMBAI

ITA 3178/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59849 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIPAK P RIPOTE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER. I.T.A. NO. 3178/MUM/2011. ASSESSMENT YEAR : 2007-08. DY. COMMISSIONER OF INCOME-TAX, THE EMERALD CO. LTD., 1(1), MUMBAI. VS. 2 ND FLOOR, BAKHATWAR, NARIMAN POINT, MUMBAI 400 021. PAN AAACT 1517A. APPELLANT. RESPONDENT. APPELLANT BY : SHRI DIPAK P. RIPOTE. RESPONDENT BY : NONE. DATE OF HEARING : 16-02-2012 DATE OF PRONOUNCEMENT : 24-02-2012 O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-1, MUMBAI DATED 12-11-2010 ON THE FOL LOWING GROUND : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN REJECTING THE A.O.S WORKING OF EXP ENSES U/S 14A AS PER RULE 8D BY OBSERVING THAT JURISDICTIONAL HIGH COURT IN T HE CASE OF GODREJ BOYCE MFG. CO. LTD. HAS DECIDED THIS ISSUE THAT RULE 8D W ILL BE APPLICABLE ONLY FROM A.Y. 2008-09 ONWARDS. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2007 DECLARI NG TOTAL INCOME OF 2 ITA NO.3178/MUM/2011 RS.4,48,309/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.4,85,06,822/- RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE U/S 10(34). NO DISALLOWANCE ON ACCOUNT OF ANY EXPENDITU RE IN RELATION TO THE SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SECTION 14A. IN THE ASSESSMENT COMPLETED U/S 14 3(3), THE AO WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EX EMPT INCOME AT RS.35,26,208/- BY APPLYING RULE 8D OF INCOME-TAX RULES, 1962 AND M ADE A DISALLOWANCE TO THAT EXTENT U/S 14A. IN SUPPORT OF THIS ACTION, HE RELIE D ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT P. L TD. 117 ITD 169 (MUM.) (SB) WHEREIN IT WAS HELD THAT RULE 8D HAS A RETROSP ECTIVE APPLICATION. ON APPEAL, THE LEARNED CIT(APPEALS) DID NOT ACCEPT THE QUANTUM OF DISALLOWANCE MADE BY THE AO U/S 14A BY APPLYING RULE 8D FOLLOWING THE DECISI ON OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. 234 CTR (BOM) 1 WHEREIN IT WAS HELD THAT RULE 8D IS APPLICABLE PROSPECTIVELY FROM ASSESSMENT YEAR 2008-09. HE, THEREFORE, DIRECTED THE AO TO COMPUTE THE QUANTUM O F EXPENSES TO BE DISALLOWED U/S 14A BY FOLLOWING SOME REASONABLE METHOD AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SU PRA). AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US, NOBODY HAS APP EARED ON BEHALF OF THE ASSESSEE. THIS APPEAL FILED BY THE REVENUE IS, THER EFORE, BEING DISPOSED OF EXPARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE ARGUM ENTS OF THE LEARNED DR, WHO HAS ACCEPTED THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F GODREJ BOYCE MFG. CO. LTD. (SUPRA). AS HELD BY THE HONBLE BOMBAY HIGH CO URT IN THE SAID CASE, RULE 8D OF INCOME-TAX RULES, 1962 IS APPLICABLE ONLY FROM A SSESSMENT YEAR 2008-09 AND 3 ITA NO.3178/MUM/2011 THE DISALLOWANCE U/S 14A FOR THE YEARS PRIOR TO ASS ESSMENT YEAR 2008-09 HAS TO BE MADE BY ADOPTING SOME REASONABLE METHOD. THE ISSUE INVOLVED IN THIS CASE THUS IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AND WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) IN DIREC TING THE AO TO RECOMPUTE THE QUANTUM OF EXPENSES TO BE DISALLOWED U/S 14A BY ADO PTING SOME REASONABLE METHOD FOLLOWING THE SAID DECISION OF JURISDICTIONA L HIGH COURT. ACCORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEA LS) ON THIS ISSUE AND DISMISS THE APPEAL FILED BY THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY, 2012. SD/- SD/- (V. DURGA RAO) (P.M. JA GTAP) JUDICIAL MEMBER. ACCO UNTANT MEMBER MUMBAI, DATED: 24 TH FEBRUARY, 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES , MUMBAI. WAKODE