Renuka Financial Services Ltd., New Delhi V. ACIT, New Delhi

ITA 3183/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4069 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

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 BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER I.T.A. NO.3183/DEL./2010 I.T.A. NO.3183/DEL./2010 I.T.A. NO.3183/DEL./2010 I.T.A. NO.3183/DEL./2010 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007- -- -08) 08) 08) 08) RENUKA FINANCIAL SERVICES LTD., RENUKA FINANCIAL SERVICES LTD., RENUKA FINANCIAL SERVICES LTD., RENUKA FINANCIAL SERVICES LTD., VS. VS. VS. VS. ACI ACI ACI ACIT, CIRCLE 15(1), T, CIRCLE 15(1), T, CIRCLE 15(1), T, CIRCLE 15(1), 86, SFS SHAKTI APARTMENTS, 86, SFS SHAKTI APARTMENTS, 86, SFS SHAKTI APARTMENTS, 86, SFS SHAKTI APARTMENTS, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. ASHOK VIHAR, PHASE ASHOK VIHAR, PHASE ASHOK VIHAR, PHASE ASHOK VIHAR, PHASE- -- -III, III,III, III, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (PAN/GIR NO. : AAACR4748M) (PAN/GIR NO. : AAACR4748M) (PAN/GIR NO. : AAACR4748M) (PAN/GIR NO. : AAACR4748M) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : (WRITTEN SUBMISSION) ASSESSEE BY : (WRITTEN SUBMISSION) ASSESSEE BY : (WRITTEN SUBMISSION) ASSESSEE BY : (WRITTEN SUBMISSION) REVENUE BY : SMT. ANUSHA KHURANA, SR.DR REVENUE BY : SMT. ANUSHA KHURANA, SR.DR REVENUE BY : SMT. ANUSHA KHURANA, SR.DR REVENUE BY : SMT. ANUSHA KHURANA, SR.DR ORDER ORDER ORDER ORDER PER A.D. JAIN, JM THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08, TAKING THE FOLLOWING GROUNDS: 1. THE ORDERS OF LOWER AUTHORITIES ARE BAD AND WRONG IN LAW. 2. THE COMMISSIONER OF INCOME TAX (APPEALS)(CIT (A)) E RRED IN CONFIRMING THE DISALLOWANCE MADE UNDER THE PROVISI ONS OF SECTION 14A OF THE INCOME TAX ACT,1961 AMOUNTING TO RS. 1,47,44,641/-. . 3. THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT T HE PROVISIONS OF SECTION 14A WERE NOT APPLICABLE TO THE C ASE OF THE-APPELLANT. 4. THAT THE LOWER AUTHORITIES OUGHT TO HAVE APPRECIA TED THAT THE PROVISIONS OF SECTIONS 14A WERE TO BE APPLIED IN A CASE WHERE THE EXPENSES WERE INCURRED IN RELATION TO INCOM E WHICH DID NOT FORM PART OF THE TOTAL INCOME. IN THE INSTANT CASE THE PROFIT ON SALE OF SHARES AND THE INTEREST INCO ME ON ADVANCES MADE BY THE APPELLANT FORMED PART OF THE TO TAL INCOME AND THE EXPENSES WERE THEREFORE INCURRED IN RELATION TO THESE TAXABLE ACTIVITIES. DIVIDEND INCOME WAS ONLY INCIDENTAL INCOME, IN RESPECT OF WHICH NO EXPEN SES WERE INCURRED. I.T.A.NO.3183/DEL./2010 (A.Y. : 2007-08) 2 5. THE A.O. FAILED TO ESTABLISH ANY DIRECT NEXUS BETW EEN THE EXEMPT INCOME AND THE EXPENSES WITHOUT WHICH NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A. 6. THAT, IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS GROSSLY ERRED IN DIRECTING THE A.O TO COMPUTE THE DISALLOWANCE UNDER RULE 8D OF THE I.T. R ULES 1962 WHICH RULE WAS INTRODUCED EXPRESSLY W.E.F. 24.3.2 008 AND HENCE WAS NOT APPLICABLE FOR ASSESSMENT YEAR IN QUESTION. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPLICATION OF RULE 8D RESULTED IN AN ONEROUS LIABILI TY AND WAS THEREFORE NOT A MERE PROCEDURAL, C1ARIFICATORY O R DECLARATORY PROVISION AND HENCE COULD NOT HAVE BEEN APPLIED TO THE APPELLANT'S CASE. 2. AT THE TIME OF HEARING OF THE APPEAL, A WRITTEN SUBMISSION HAS BEEN PLACED ON RECORD, ON BEHALF OF THE ASSESSEE. THE WRITTEN SUBMISSION READS AS FOLLOWS: 1. THE APPELLANT HAS RAISED SEVEN GROUNDS OF APPEAL. HOWEVER, THEY ALL PERTAIN TO DISALLOWANCE MADE U/S 14 A OF THE INCOME TAX ACT, 1961. 2. THE A.O. HAD MADE AS PER RULE 8D WHICH DISALLOWANC E WAS UPHELD BY THE LD. CIT(A). 3. IT IS SUBMITTED THAT RECENTLY THE BOMBAY HIGH COUR T IN THE CASE OF GODREJ & BOYCE 234 ITR 1 (328 ITR 81) HAS HEL D THAT RULE 8D IS NOT RETROSPECTIVE BUT IS APPLICABLE W.E.F. 24.3. 2008 ( I.E. AY 2008-09). 4. IT IS THEREFORE SUBMITTED THAT RULE 80 IS NOT APPLI CABLE FOR THE YEAR UNDER CONSIDERATION AND THEREFORE IT IS REQU ESTED THAT THE CASE MAY BE RESTORED BACK TO THE FILE OF THE AO T O RECOMPUTE THE DISALLOWANCE IN ACCORDANCE WITH THE ABOVE JUDGME NT OF THE BOMBAY HIGH COURT. 5. WE MAY FURTHER SUBMIT THAT THE SAME ISSUE AROSE FOR CONSIDERATION IN APPELLANT'S OWN CASE IN THE IMMEDIATE LY PRECEDING YEAR. THE HON'BLE F BENCH VIDE ITS ORDER D ATED 8/10/2010 TO SET ASIDE THE MATTER TO THE FILE OF THE AO. A COPY OF THE ORDER IS ENCLOSED. I.T.A.NO.3183/DEL./2010 (A.Y. : 2007-08) 3 3. A COPY OF THE AFORESAID TRIBUNAL ORDER DATED 08.1 0.10 IN THE ASSESSEES OWN CASE, FOR ASSESSMENT YEARS 2002-03 AND 2006-07, HAS BEEN PLACED ON RECORD ALONG WITH WRITTEN SUBMISSION. 4. NONE ATTENDED ON BEHALF OF THE ASSESSEE. IN THIS REG ARD, LD.DR. HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 5. GROUND NO.1 IS GENERAL AND DOES NOT REQUIRE ANY AD JUDICATION. 6. GROUND NOS.2 TO 6 PERTAIN TO THE DISALLOWANCE MADE UNDER THE PROVISIONS OF SECTION 14A OF THE I.T. ACT, AMOUNTING T O `14744641. 7. THE DISALLOWANCE WAS MADE U/S 14A OF THE ACT, AS PER RULE 8D OF THE I.T. RULES. THIS DISALLOWANCE WAS UPHELD BY THE CI T(A). 8. THE CONTENTION ON BEHALF OF THE ASSESSEE IS THAT THE CASE IS COVERED BY THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, 328 I.T.R. 81, HOLDING THAT RULE 8D OF THE I.T. RULES IS NOT RETROSPECTIVE AND IS APPLIC ABLE ONLY W.E.F. 24.3.08, I.E. FOR ASSESSMENT YEAR 2008-09 ONWARDS. THE YEAR UNDER CONSIDERATION IN THE PRESENT APPEAL IS ASSESSMENT YEAR 200 7-08 AND ACCORDING TO THE ASSESSEE, RULE 8D AS PER GODREJ & BOYC E MFG.CO. LTD. VS. DCIT (SUPRA) IS NOT APPLICABLE. THE ASSESSEE HAS REQU ESTED THAT THE CASE BE, AS SUCH RESTORED TO THE FILE OF THE AO TO RE-COMPUTE THE DISALLOWANCE IN ACCORDANCE WITH GODREJ & BOYCE MFG. CO. LTD. VS. DCIT(SUPRA). RELIANCE HAS BEEN PLACED ON THE TRIBUN AL ORDER(SUPRA) DATED 8.10.10, WHEREIN A SIMILAR COURSE HAS BEEN FOLLO WED. 9. WE FIND THE REQUEST OF THE ASSESSEE TO BE JUSTIFIED. IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, RULE 8D OF THE RULES H AS BEEN HELD TO BE PROSPECTIVE IN NATURE, APPLICABLE FOR ASSESSMENT YEAR 20 08-09 ONWARDS. AS SUCH, THE MATTER IS RESTORED TO THE FILE OF THE AO FOR RE- COMPUTING THE DISALLOWANCE IN ACCORDANCE WITH GODRE J & BOYCE MFG.CO. LTD. VS. DCIT(SUPRA). I.T.A.NO.3183/DEL./2010 (A.Y. : 2007-08) 4 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09.05.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: MAY 09 , 2011. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XVIII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT