ACIT, CHENNAI V. M/s. Sundaram Fasterners & Investment Ltd., CHENNAI

ITA 388/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61079 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.388(MDS)/2012 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE VI(4), CHENNAI. VS. M/S. SUNDARAM FASTENERS & INVESTMENT LTD., 98A, 7 TH FLR. AURAS CORPORATE CENTRE, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-600 004. PAN AAACS9063L. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P JACOB, IRS, ADDL. CIT RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADV OCATE DATE OF HEARING : 8 TH MAY, 2012 DATE OF PRONOUNCEMENT : 8 TH MAY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE REVENUE FOR THE ASSESSME NT YEAR 2007-08 IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME-TAX(APPEALS)-VI AT CHENNAI, DATED 29-11-2011 . THE - - ITA NO.388 OF 2012 2 APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ONLY GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN RE STRICTING THE DISALLOWANCE UNDER SECTION 14A TO 2% OF DIVIDEN D INCOME OF ` 19,23,487/-. IT IS THE CASE OF THE REVENUE THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO NOTE THAT THE VERY PURPOSE OF INTRODUCTION OF SECTION 14A, READ WITH R ULE 8D, IS TO CONSIDER THE EXPENDITURE INCURRED BY AN ASSESSEE FO R EARNING EXEMPTED INCOME ON PROPORTIONATE BASIS. IT IS ALSO THE CASE OF THE REVENUE THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD ., 328 ITR 81, WHICH HAS BEEN RELIED ON BY THE COMMISSIONER OF INCOME- TAX(APPEALS), HAS NOT BECOME FINAL, AS THE REVENUE HAS PREFERRED AN SLP BEFORE THE HONBLE SUPREME COURT. 3. IN DECIDING THE ISSUE, THE COMMISSIONER OF INCO ME- TAX(APPEALS) RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., 234 CTR 1, WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D CAN BE APPLIED ONLY PROSPECTIVELY AND, THEREFORE, T HE SAME - - ITA NO.388 OF 2012 3 CANNOT BE APPLIED FOR THE IMPUGNED ASSESSMENT YEAR 2007-08. THEREFORE, THE COMMISSIONER OF INCOME-TAX(APPEALS), DEVIATING FROM RULE 8D, ESTIMATED THE DISALLOWANCE AT 2% OF T HE DIVIDEND INCOME EARNED BY THE ASSESSEE AND DELETED THE BALAN CE OF DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. WE FIND THAT THE COURSE OF ACTION FOLLOWED BY T HE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUST AND PRO PER IN LAW. ONCE A CONSTITUTIONAL COURT DECLARES THAT RULE 8D I S NOT APPLICABLE RETROSPECTIVELY, IT IS THE BOUNDEN DUTY OF THE COMMISSIONER OF INCOME-TAX(APPEALS) TO FOLLOW THAT DECLARATION OF LAW AND VACATE THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER AFTER APPLYING RULE 8D. THE COMMISSIONER O F INCOME- TAX(APPEALS) IS PERFECTLY JUSTIFIED IN DOING SO. A T THE SAME TIME, THE COMMISSIONER OF INCOME-TAX(APPEALS) ALSO EXAMIN ED THE FACTS OF THE CASE AND FOUND THAT A REASONABLE DISAL LOWANCE IS CALLED FOR. ON THAT GROUND, HE ESTIMATED THE DISAL LOWANCE AT 2% OF THE DIVIDEND INCOME. THIS COURSE OF ACTION IS A GAIN JUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THEREFORE, WE HOLD THAT THIS APPEAL FILED BY TH E REVENUE IS LIABLE TO BE DISMISSED. - - ITA NO.388 OF 2012 4 ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 8 TH OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 8 TH MAY, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.