DCIT 8(3), MUMBAI V. SUNBRIGHT CEMENT AGENCIES P.LTD, MUMBAI

ITA 3913/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59878 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: RAMCHANDRA JUVEKAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHIRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 3913/MUM/2011 ASSESSMENT YEAR : 2007-08 THE ASSTT. COMMISSIONER OF INCOME TAX-8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400 020 VS. M/S. SUNBRIGHT CEMENT AGENCIES PRIVATE LIMITED 109, STERLING CHAMBERS, 56, MOGRA VILLAGE LANE, OFF. OLD NAGARDAS ROAD, ANDHERI (E), MUMBAI-400 069 PAN NO: AAACS 6792 C (APPELLANT) (RESPONDENT) APPELL ANT BY : SHRI A. K. NAYAK RESPONDENT BY : SHRI RAMCHANDRA JUVEKAR DATE OF HEARING : 1 3 .03.2012 DATE OF PRONOUNCEMENT : 16 .03.2012 ORDER PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT A GAINST ORDER DATED 22.02.2011, PASSED BY THE CIT(APPEALS)-18, MU MBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASS ESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS OF APPEALS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALL OWANCE OF `. 18,82,510/- U/S. 14A OF THE ACT TO `. 1,000/- ONLY. ITA NO : 3913/MUM/2011 M/S. SUNRIGHT CEMENT AGENCIES PRIVATE LIMITED 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN REDUCING THE DISALLOWANCE U/S.1 4A OF THE ACT ON THE BASIS OF EXEMPT INCOME WITHOUT CONSIDERI NG THE FACT THAT IN THE CASE OF M/S.GODREJ & BOYCE MFG. CO. LTD . VS. DCIT (328 ITR 81), THEIR LORDSHIPS HAVE UPHELD THE PROVI SIONS OF RULE 8D AS REASONABLE IN NATURE AND CONSTITUTIONALL Y VALID. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN APPORTIONING THE EXPENSE U/S.14A OF THE ACT IN AN ADHOC AND ARBITRARY MANNER. 2. THE SHORT CONTROVERSY HERE IN THIS APPEAL IS WIT H REGARD TO THE DISALLOWANCE MADE U/S.14A. DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE ON THE ONE HAND HAS SHOWN DIVIDEND INCOME OF `. 6,147/- (WHICH WAS CLAIMED TO BE EXEMPT U/S.10(34)) AND ON THE OTHER HAND, THE ASSES SEE HAS NOT ATTRIBUTED ANY EXPENSES WHICH MIGHT HAVE BEEN INCUR RED TO EARN THE SAID EXEMPT INCOME. HE FURTHER OBSERVED THAT THE ASSESS EE IN THE COMPUTATION OF THE INCOME HAS NOT MADE ANY DISALLOW ANCE OF EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A. 2.1 BEFORE THE ASSESSING OFFICER, THE ASSESSEE CONT ENTED THAT NO PART OF THE EXPENDITURE HAVE BEEN INCURRED TO EARN THE SAID DIVIDEND INCOME. THE ASSESSING OFFICER HOWEVER REJECTED THE CONTENTI ON OF THE ASSESSEE AND HELD THAT IN VIEW OF THE PROVISIONS OF RULE 8D, DISALLOWANCE OF EXPENDITURE U/S.14A HAS TO BE MADE AND IN SUPPORT O F SUCH DISALLOWANCE, HE PLACED RELIANCE ON THE SPECIAL BEN CH OF THE ITAT IN THE CASE OF CHEMINVEST LTD. VS ITO REPORTED IN [2009] 317 ITR (AT) 86 (DEL), AND DAGA CAPITAL MANAGEMENT PVT. LTD. REPORTED IN 119 TTJ 289 (MUM) AND ACIT VS. CITICORP FINANCE (INDIA) LTD. REPORTED IN 108 ITR 457 . HE ACCORDINGLY CALCULATED THE DISALLOWANCE U/S.1 4A AS ITA NO : 3913/MUM/2011 M/S. SUNRIGHT CEMENT AGENCIES PRIVATE LIMITED 3 PER THE PROVISIONS OF RULE 8D AT `. 18,82,510/- AS PER THE COMPUTATION MADE IN PARA 3.4 OF THE ASSESSMENT ORDER. 3. IN THE FIRST APPEAL, THE APPELLANT CONTENTED THA T IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT REPORTED IN 328 ITR 81 , RULE 8D WILL NOT BE APPLICABLE IN THIS YEAR WHERE IN IT HAS BEEN HELD THAT RULE 8D IS NOT RETROSPECTIVE AND APPLIES FROM THE ASSESSMENT YEAR 2008-09 ONWARDS AND NOT FOR THE EARLIER YEARS. THE CIT(APPEALS) LOOKING TO THE FACT THAT THE DIVIDEND INCOME OF THE APPELLA NT WAS `. 6,147/- ONLY, HE MADE AN ESTIMATE OF `. 1,000/- FOR MAKING THE DISALLOWANCE U/S.14A. 4. THE LEARNED SR. DR ON BEHALF OF THE DEPARTMENT C ONTENTED THAT EVEN THOUGH RULE 8D WILL NOT BE APPLICABLE IN THE E ARLIER YEARS IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURTS JUDGMENT, B UT THE DISALLOWANCE OF `. 1,000/- IS TOO LOW ON ESTIMATE LOOKING TO THE INVES TMENT MADE BY THE APPELLANT, AS THE AVERAGE COST OF VALUE OF THE INVE STMENT ITSELF WAS AT `. 37,65,01,957/-. 5. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFF ICER AS WELL AS THE CIT(APPEALS) IT IS SEEN THAT AS PER THE NOTE GIVEN IN PAGE 5 OF THE ASSESSMENT ORDER, THERE IS NO INTEREST DEBITED TO T HE PROFIT AND LOSS ACCOUNT. ONCE, THERE IS NO COST OF BORROWING, THEN IT CANNOT BE PRESUMED THAT THE APPELLANT HAS DIVERTED BORROWED F UNDS FOR THE PURPOSE OF ACQUIRING INVESTMENTS. HOWEVER, LOOKING TO THE FACT THAT THE DIVIDEND INCOME IS MERELY `. 6,147/-, THE DISALLOWANCE OF `. 1,000/- AS MADE BY THE CIT(APPEALS) SEEMS TO BE QUITE REASONAB LE AND ACCORDINGLY, WE CONFIRM THE DISALLOWANCE OF `. 1,000/- AS HAVE BEEN MADE BY THE CIT(APPEALS). THUS THERE IS NO MERIT IN THE APPEAL OF THE DEPARTMENT. ITA NO : 3913/MUM/2011 M/S. SUNRIGHT CEMENT AGENCIES PRIVATE LIMITED 4 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MARCH, 2012. S D/ - S D/ - ( P.M. JAGTAP ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 16.03.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI