Sidhi Vinayak Investments Ltd., New Delhi V. ACIT, New Delhi

ITA 3319/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53228 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 29-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTHY
• Keywords: Advance ruling
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER I.T.A NO. 3319/DEL/10 ASSTT. YEAR 2007-08 SIDHI VINAYAK INVESTMENTS LTD. (SINCE AMALGAMATED WITH BENGAL & ASSAM COMPANY LTD.) LINK HOUSE, 4 TH FLOOR, 3, BHADUR SHAH ZAFAR MARG, NEW DELHI 110 002. PAN AAGCS7770L VS. ACIT, CIRCLE 8(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI BASANT KUMAR, ADVOCATE RESPONDENT BY: SMT. S. MOHANTHY, DR ORDER PER RAJPAL YADAV : JM THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 3 RD JUNE, 2010 PASSED FOR ASST. YEAR 2007-08. THE SOLI TARY GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN CON FIRMING THE DISALLOWANCE OF EXPENSES U/S 14A AT `. 10,11,823/-. 2. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECOR D THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 12.11.2007 DECLARING TOTAL INCOME OF `. 17,85,970/-. THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES, M UTUAL FUNDS, PROPERTIES ITA NO.3319/DEL/10 ASSTT. YEAR 2007-08 2 ETC. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO TH E AO THAT ASSESSEE HAS CLAIMED EXEMPTION IN RESPECT OF DIVIDEND INCOME AT `. 23,18,009/-. HE DIRECTED THE ASSESSEE TO EXPLAIN WHY EXPENDITURE AT TRIBUTABLE TO THIS INCOME SHOULD NOT BE DISALLOWED U/S 14A OF THE ACT. THE ASSTT. ORDER FURTHER, REVEALED THAT AO HAS MADE THE DISALLOWANCE U/S 14A WITH THE HELP OF RULE 8D. HE WORKED OUT THE DISALLOWANCE OF `. 10 ,11,823/-. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 4. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT HO NBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE LTD. VS. DCIT RE PORTED IN 328 ITR 81 HAS HELD THAT RULE 8D HAS BEEN BROUGHT ON THE STATUTE B OOK W.E.F. 24 TH MARCH, 2008. IT IS NOT APPLICABLE WITH RETROSPECTIVE EFFEC T RATHER IT IS APPLICABLE PROSPECTIVELY. ACCORDING TO THIS DECISION, RULE 8D WILL BE APPLICABLE FROM ASSTT. YEAR 2008-09. ON THE STRENGTH OF THIS DECISI ON, HE POINTED OUT THAT DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE WITH THE HELP OF RULE 8D. HE FURTHER CONTENDED THAT ASSESSEE HAS CLAIMED EXPE NSES AT `7,26,722/- IN THE COMPUTATION OF INCOME. THE DISALLOWANCE CANN OT BE MORE THAN THIS EXPENDITURE. LD. DR ON THE OTHER HAND WAS UNABLE TO CONTROVERT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. SHE POI NTED OUT THE MATTER BE REMITTED BACK TO THE AO FOR MAKING DISALLOWANCE FOR THE PURPOSE OF SECTION 14A AFTER TAKING INTO CONSIDERATION THE SUR ROUNDING CIRCUMSTANCES. 5. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES, WE ARE OF THE VIEW THAT NO DOUBT DISALLOWANCE IN THIS ASSTT. YEAR U/S 14A CANNOT BE MADE WITH THE HELP OF RULE 8D AS PER THE DECISION O F HONBLE BOMBAY HIGH ITA NO.3319/DEL/10 ASSTT. YEAR 2007-08 3 COURT. THUS, IN THE ABSENCE OF RULE 8D, THE DISALLO WANCE HAS TO BE WORKED OUT AFTER TAKING INTO CONSIDERATION THE SURROUNDING CIRCUMSTANCES DEMONSTRATING THE FACTORS RELEVANT FOR DETERMINING THE REASONABLE EXPENSES ASSESSEE MIGHT HAVE INCURRED FOR EARNING T AX FREE INCOME. THEREFORE, WE REMIT THIS ISSUE TO THE AO FOR READJU DICATION. AS FAR AS THE APPREHENSION OF LD. COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE SHOULD NOT BE MORE THAN THE EXPENSES CLAIMED IN THE COMPUT ATION OF INCOME IS CONCERNED ,TO OUR MIND, IT IS MISPLACED BECAUSE IT IS A RELEVANT FACTOR WHICH IS TO BE LOOKED INTO BY THE AO WHILE WORKING OUT THE REASONABLE EXPENSES DESERVES TO BE DISALLOWED. WE DO NOT WISH TO GIVE ANY ADVANCE RULING ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2011. SD/- SD/- [A.N. PAHUJA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.11.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT ITA NO.3319/DEL/10 ASSTT. YEAR 2007-08 4 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT