Span India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 39/DEL/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0142 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: PN SHASTRI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T. A. NO.39/DEL/2011 ASSESSMENT YEAR : 2006-07 SPAN INDIA PVT. LTD., ASSTT. COMMISSIONER OF INCO ME-TAX, 220, OKHLA INDUSTRIAL ESTATE, VS. CIRCLE 9(1), NEW DELHI. NEW DELHI. PAN: AAACS0079A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI M.P. RASTOGI, ADVOCATE & SHRI P.N. SHASTRI, CA. RESPONDENT BY: SHRI A.K. MONGA , DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 2 3.12.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO THE ASSESSMENT YEAR 2006-07. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DIR ECTED AGAINST THE CIT(A)S ORDER IN CONFIRMING THE DISALLOWANCE OF RS .46.50 LAKH MADE BY THE ASSESSING OFFICER UNDER RULE 8D READ WITH SECTION 1 4A OF THE INCOME-TAX ACT, 1961 (THE ACT). 2 3. THE ASSESSEE IS AN EXPORTER OF READYMADE GARMENT S AND ALSO EARNS INCOME FROM HOUSE PROPERTY AND INVESTMENTS. THE AS SESSEE HAS DERIVED TAX FREE INCOME IN THE FORM OF DIVIDENDS AND LONG TERMS CAPITAL GAIN AMOUNTING TO RS.1,30,03,432/- AND RS.8,54,40,392/- RESPECTIVE LY. SINCE THE ASSESSEE HAD INCURRED EXEMPT INCOME, THE AO ASKED THE ASSESS EE TO FILE THE WORKING OF DISALLOWANCE OF EXPENSES UNDER SEC. 14A READ WIT H RULE 8D OF THE INCOME-TAX RULES. IN REPLY, THE ASSESSEE SUBMITTED THAT THERE WERE NO SPECIFIC EXPENSES INCURRED FOR EARNING THE TAX FREE INCOME BUT HAS ALREADY OFFERED RS.1,00,000/- IN THE COMPUTATION FILED ALON G WITH RETURN OF INCOME. THE AO THEN MADE A REFERENCE TO THE DECISION OF SPE CIAL BENCH OF ITAT IN THE CASE OF ITO MUMBAI VS. DAGA CAPITAL MANAGEMENT (P) LTD., 2008- TIOL-509-MUM-SB. THE AO THEN FOLLOWED THE METHOD PRESCRIBED UNDER RULE 8D AND WORKED OUT THE AMOUNT OF RS.43,66,480/- TO BE DISALLOWED UNDER SEC. 14A OF THE ACT. THE AO ACCORDINGLY DISA LLOWED THE SUM OF RS.43,66,480/-. 4. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE AOS ACTION AFTER FOLLOWING THE AFORESAID DECISION OF SPECIAL BENCH O F ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT.LTD. (SUPRA). 5. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE T HE TRIBUNAL. 6. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E MATERIAL ON RECORD. 3 7. THE DECISION OF SPECIAL BENCH IN THE CASE OF DAG A CAPITAL MANAGEMENT PVT. LTD. (SUPRA) HAS BEEN REVERSED BY T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURIN G CO. LTD. VS. DCIT (2010) 234 CTR 1 (BOM.), HOLDING THAT RULE 8D WOULD BE APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09. IN THIS CASE, TH E ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2006-07. THEREFORE, TH E METHOD PROVIDED UNDER RULE 8D SHALL NOT BE APPLICABLE TO THIS CASE FOR THE PURPOSE OF DISALLOWANCE OF EXPENSES UNDER SEC. 14A OF THE ACT. THE AO MAY DISALLOW ONLY THOSE EXPENSES WHICH HAVE ACTUALLY BEEN INCURR ED FOR THE PURPOSE OF EARNING THE EXEMPT INCOME AS SO OBSERVED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SU PRA). WE, THEREFORE, RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA). THE ASSESSING OFFICER SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. IN THE RESULT, THIS APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. 9. THIS DECISION WAS PRONOUNCED IMMEDIATELY AFTER T HE HEARING WAS OVER ON 14 TH MARCH, 2011. SD/- SD/- (K.G. BANSAL) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH MARCH, 2011. 4 ITA NO.39/DEL/2011 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.