M/s Sargam Consultants Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 372/DEL/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0137 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: MANU KUMAR GIRI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

ITA NO. 372/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 372/DEL/2011 A.Y. : 2005-06 M/S SARGAM CONSULTANTS PVT. LTD., 414/1, 4 TH FLOOR, DDA COMM. COMPLEX, DISTT. CENTER, JANAK PURI, NEW DELHI 110 058 (PAN/GIR NO. : AAFCS0880E) VS. INCOME TAX OFFICER, WARD 7(3), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : MR. MANU KUMAR GIRI, ADV. DEPARTMENT BY : MR. KISHORE B. (D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 28/10/ 2010 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE ISSUES RAISED READ AS UNDER:- THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN REJECTING ASSESSEES CONTENTION THAT THE PROVISI ONS OF SECTION 14A ARE NOT ATTRACTED IN ASSESSEES CASE, THEREBY C ONFIRMING THE ADDITION OF ` 2,19,768/- MADE BY THE ASSESSING OFFI CER U/S 14A OF THE INCOME TAX ACT, RESULTING IN REDUCTION OF RET URNED LOSS TO THAT EXTENT. ITA NO. 372/DEL/2011 2 THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN HOLDING THAT DISALLOWANCE U/S 14A HAS BEEN CORRECTL Y WORKED OUT BY DISALLOWING EXPENDITURE ON PROPORTIONATE BASIS, WHICH IS A REASONABLE BASIS. 3. IN THIS CASE ASSESSING OFFICER THE ASSESSEE IS AN INVESTMENT FINANCE COMPANY. DURING THE YEAR UNDER CONSIDERATIO N THE ASSESSEE HAS SHOWN INTEREST RECEIPT OF ` 69,707/- AGAINST IN TEREST AND ` 718834/- AGAINST DIVIDEND. ASSESSING OFFICER NOTED AS DIVI DEND INCOME IS AN EXEMPT INCOME, THE PROPORTIONATE EXPENSES SHOULD BE DISALLOWED U/S 14A. ASSESSEE RESPONDED THAT ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM EQUITY SHARES OF M/S APOLLO TYRES LTD. AND THE COMPANY HAD NOT INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOM E. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED. HE COMPUTED D ISALLOWANCE U/S 14A OF DIVIDEND INCOME ON PROPORTIONATE BASIS. TH E TOTAL DISALLOWANCE THUS CAME TO ` 219768. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ASSESSING OFFICERS ACTION. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT RECORDS. WE FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT IN ITA NO. 626 OF 2010 234 CTR 1 ITA NO. 372/DEL/2011 3 HAS OVERRULED THE ITAT DECISION OF DAGA CAPITAL MANA GEMENT (SUPRA) AND HELD THAT RULE 8D HAS BEEN NOTIFIED ON 24.3.200 8 AND WILL BE APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. IN THE SAID DECISION IT HAS ALSO BEEN HELD THAT ASSESSING OFFICER ADOPT T HE REASONABLE BASIS. IN THE PRESENT CASE, IN OUR CONSIDERED OPINION, T HE ASSESSING OFFICER NEEDS TO WORK OUT FRESH, THE EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME, IN ACCORDANCE WITH THE HONBLE M UMBAI HIGH COURT DECISION CITED ABOVE. NEEDLESS TO ADD THAT THE ASS ESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/03/2011. SD/- SD/- [ [[ [C.L. SETHI C.L. SETHI C.L. SETHI C.L. SETHI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 24/03/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES