Opelina Finance & Investment Ltd., New Delhi V. ITO, New Delhi

ITA 4044/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6900 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: GOPAL NATHANI
• Keywords: Earning of tax free income; Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI SHAMIM YAHYA, AM I.T. A. NO.4044/DEL OF 2010 ASSESSMENT YEAR: 2006-07 M/S OPELINA FINANCE & INVESTMENT LTD., VS INCOME-T AX OFFICER, 28, NAJAFGARH ROAD, NEW DELHI. WARD-13(3), NEW DE LHI. APPELLANT RESPONDENT APPELLANT BY: SHRI GOPAL NATHANI RESPONDENT BY: SMT. BANITA DEVI NAOREM ORDER PER C.L. SETHI, JM: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 2 0.05.2010 PASSED BY THE LEARNED CIT (A) PERTAINING TO THE ASSESSMENT YE AR 2006-07. 2. THE ASSESSEE HAS TAKEN A GROUND THAT LEARNED CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.51,40,545/- DISAL LOWED BY THE AO BY APPLYING RULE 8D OF THE INCOME-TAX RULES AS AGAINST EXPENDITURE OF RS.39,77,771/- SUO MOTO OFFERED BY THE ASSESSEE FOR THE PURPOSE OF DISALLOWANCE WHILE FILING THE RETURN OF INCOME. 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THOUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE RETURN FIL ED BY THE ASSESSEE, THE ASSESSEE HAS ITSELF DISALLOWED THE SUM OF RS.39,77, 771/- BEING EXPENSES 2 INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE DETAILS OF THE EXPENSES ADDED BACK BY THE ASSESSEE ITSELF ARE AS U NDER: EXPENSES ATTRIBUTABLE TO EARNING OF DIVIDEND INCOM E U/S 14A: (I) INTEREST EXPENSES RS.3,799,874/- (II) DEMAT EXPENSES RS. 1,430/- (III) OFFICE EXPENSES RS.1,20,461/- (50% OF TOTAL RS.2,40.921/-) (IV) EMPLOYEES REMUNERATION RS. 56,007/- (50% OF TOTAL RS.1,12,013/-) 4. HOWEVER, THE AO APPLIED RULE 8D AND WORKED OUT T HE AMOUNT OF DISALLOWANCE AT RS.51,40,545/- AS AGAINST THE SUM O F RS.37,99,874/- DISALLOWED BY THE ASSESSEE ITSELF. IN OTHER WORDS, THE AO MADE FURTHER DISALLOWANCE OF RS.13,40,671/- AND THAT HAS BEEN DO NE BY THE AO BY APPLYING THE METHOD PROVIDED UNDER RULE 8D OF THE I NCOME-TAX RULES. 5. ON AN APPEAL, CIT(A) CONFIRMED THE AOS ACTION B Y RELYING UPON THE METHOD PROVIDED UNDER RULE 8D OF INCOME-TAX RULES A ND RELYING UPON THE DECISION OF ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF ITO VS DAGA CAPITAL MANAGEMENT P. LTD. (2009) 117 ITD 169. 6. BEING AGGRIEVED WITH THE ORDER OF CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 3 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF CIT(A)S ORDER, IT IS SEEN T HAT CIT(A) HAS RELIED UPON THE DECISION OF TRIBUNAL MUMBAI SPECIAL BENCH IN TH E CASE OF ITO VS DAGA CAPITAL MANAGEMENT P. LTD. (SUPRA) WHERE RULE 8D HA S BEEN HELD TO BE APPLICABLE RETROSPECTIVELY. HOWEVER, THIS DECISION OF THE SPECIAL BENCH OF THE MUMBAI HAS NOW SINCE BEEN OVERRULED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS DCIT (2010) 234 CTR 1 (BOM). IN THE PRESENT CASE, THE ACTUAL EXPENDITU RE INCURRED FOR EARNING THE DIVIDEND INCOME HAS BEEN DISALLOWED BY THE ASSESSEE ITSELF AND NO FURTHER DISALLOWANCE BY APPLYING RULE 8D IS PERMISSIBLE. W E, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE AO AND FURTHER CONFIRMED B Y THE CIT(A). IN OTHER WORDS, THE DISALLOWANCE OF EXPENSES SHALL BE RESTRICTED ONLY TO RS.39,77,771/- ALREADY DISALLOWED BY THE AO WHILE C OMPUTING THE TOTAL INCOME AND NO FURTHER DISALLOWANCE IS CALLED FOR. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 28 TH OCTOBER, 2010 IMMEDIATELY AFTER THE HEARING WAS OVER. (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: OCTOBER, 2010 VIJAY 4 COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-VIII, NEW DELHI 5. DR ASSISTANT REGISTRAR