LEE & MUIRHEAD P. LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 3490/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48546 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: MRS AARTI VISSANJI
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI R,S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ` ITA NO. 3490/MUM/2010 ASSESSMENT YEAR: 2006-07 M/S LEE & MUIRHEAD PVT. LTD. APPELLANT ORICON HOUSE, 2 ND FLOOR, 12-K, DUBHASH MARG FORT, MUMBAI 400 023 (PAN AAACL0918M) VS. THE DY. COMMISSIONER OF INCOME-TAX, RESPONDENT RANGE 2(2), ROOM NO. 545, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 APPELLANT BY : MRS. AARTI VISSANJI RESPONDENT BY : MR. RAJEEV AGARWAL . ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- 5, MUMBAI, PASSED ON 08/02/2010 FOR THE ASS ESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEA L IS IN RESPECT OF DISALLOWANCE OF RS. 3,67,302/- U/S 14A OF THE AC T. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER NOTICED THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 43.14 LAKH AND THE SAME WAS CLAIMED AS EXEMPT U/S 10(34 OF THE ACT. HOWEVER, NO DISALLOWANCE WAS MADE IN TERMS OF SECTION 14A ON THE GROUND THAT NO BORROWED FUNDS WERE USED FOR MAKING INVESTMENTS ON WHICH ITA NO. 3490/M/2010 LEE & MUIRHEAD P. LTD. 2 DIVIDEND INCOME WAS EARNED. THE ASSESSING OFFICER, THEREFORE, WORKED OUT THE DISALLOWANCE IN TERMS OF RULE 8D AMOUNTING TO RS. 3,67,302/- BY HOLDING THAT THE DISALLOWANCE WAS REQUIRED IN VI EW OF COMMON POOL OF FUND USED FOR INVESTMENTS. BEFORE THE CIT(A), AS SESSEE FILED WRITTEN SUBMISSION WHEREIN IT WAS STATED THAT RULE 8D IS NO T APPLICABLE TO THE YEAR UNDER CONSIDERATION AS THE SAME IS NOT RETROSP ECTIVE IN OPERATION. IT WAS ALSO STATED THAT THE EXPENSES HAD NO DIRECT OR INDIRECT NEXUS WITH THE INVESTMENTS MADE AS THE INV ESTMENTS WERE OUT OF OWN FUNDS ONLY AND NO BORROWED FUNDS WERE UTILIZ ED. IT WAS STATED THAT THERE WAS NO EXPENDITURE RELATABLE TO DIVIDEND AS THE SAME WERE ELECTRONICALLY CREDITED TO THE BANK ACCOUNT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) FOLLOWING T HE SPECIAL BENCH DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ITO V S. DAGA CAPITAL INVESTMENT LTD. [2009] 26 SOT 603 (MUM)(SB), CONFIR MED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US THE LEARNED COU NSEL FOR THE ASSESSEE HAS SUBMITTED THAT SHE FILED SOME ADDITION AL SUBMISSIONS IN SUPPORT OF ASSESSEES CASE, WHICH MAY BE TAKEN INTO CONSIDERATION WHILE DECIDING THE APPEAL. 5. THE LEARNED REPRESENTATIVES OF THE PARTIES HAVE FAIRLY CONCEDED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD., [2010] 328 ITR 81 (BOM.) WHEREIN THE HONBLE COURT HELD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HA D TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. F OR THAT PURPOSE, THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED ITA NO. 3490/M/2010 LEE & MUIRHEAD P. LTD. 3 TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE A PPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE AO SHOULD PROV IDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA), WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE AND AFTER CONSIDERING THE ADDITIONAL S UBMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT(A). 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 29 TH APRIL, 2011. SD/- SD/- (R.S.SYAL) (V. DURGA R AO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 29 TH APRIL, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV