Nestle India Ltd., New Delhi V. DCIT, New Delhi

ITA 4127/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6822 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 04-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAURATH
• Assessee Lawyers: RUPESH J AIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 4127/DEL/10 A.Y.: 2006-07 NESTLE INDIA LTD., VS. DCIT, LARGE TAX PAYER UN IT NESTLE HOUSE, JACARANDA MARG, NEW DELHI. DLF CITY, PHASE-II, NEW DELHI. PAN/ GIR NO. AAACN0757G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI RUPESH JAIN ADV. RESPONDENT BY : SHRI J.S. NAURATH CIT(DR) O R D E R PER R.P. TOLANI, J.M : THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF CIT(A)-LTU, NEW DELHI DATED 26-07-2010 RELATING TO A.Y. 2006-07. VA RIOUS GROUNDS ARE RAISED CHALLENGING DISALLOWANCE OF AN AMOUNT OF RS. 34,26,728/- ALLEGED TO HAVE BEEN INCURRED FOR EARNING DIVIDEND INCOME OF RS. 6,47,36,219/-, UNDER RULE 8-D BY INVOKING THE PROVISIONS OF SEC. 14-A OF THE I.T. ACT. 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT L OWER AUTHORITIES HAVE DISALLOWED THE ABOVE EXPENSES RELYING ON THE ORDE R OF ITAT SPECIAL BENCH MUMBAI IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEME NT 26 SOT 603. IT WAS PLEADED THAT RULE 8-D HAS BEEN HELD TO BE PROSP ECTIVE IN NATURE, IN VIEW ITA 4127/DEL/10 NESTLE INDIA LTD. 2 THEREOF, THE AO CAN ONLY DISALLOW SOME INDIRECT EXP ENSES, WHICH MAY BE ATTRIBUTABLE TO THE EARNING OF INTEREST INCOME. IN THIS CASE THE ASSESSEE HAS RECEIVED TAX-FREE DIVIDEND INCOME OF RS. 6,47,36,21 9/-28/-, ON ACCOUNT OF INVESTMENT IN EARLIER YEAR OUT OF INTEREST FREE FUN DS AVAILABLE TO ASSESSEE, WHICH HAVE BEEN REFLECTED IN PERSONAL BALANCE SHEET AND MARGINAL DISALLOWANCE MAY BE RETAINED. 3. LEARNED DR, ON THE OTHER HAND, CONTENDS THAT HON BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT & ANR. (2010) 234 CTR 1, HAS NOT HELD THAT RULE 8-D IS UNREASONAB LE. ONLY ITS APPLICATION HAS BEEN HELD TO BE PROSPECTIVE. DISALLOWANCE OF IN DIRECT EXPENSES ON A REASONABLE BASIS HAS NOT BEEN DISAPPROVED BY THE HO NBLE MUMBAI HIGH COURT. SINCE RULE 8-D HAS NOT BEEN HELD TO BE UNREA SONABLE IN THIS CASE, , IT CAN BE APPLIED TO EARLIER YEAR ALSO. 4. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE GONE TH ROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. HONBLE MUMBAI HIGH C OURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA), HAS HELD RULE 8-D TO BE APPLICABLE FROM PROSPECTIVE EFFECT AND WHAT CAN BE DISALLOWED U/S14A IS DIRECT/ INDIRECT EXPENSES WHICH MAY BE ATTRIBUTABLE TO EARNING OF TA X FREE INCOME. ASSESSEE HAS EARNED ABOVE AMOUNT AS TAX-FREE INCOME BY WAY OF DIVIDEND, ON WHICH INDIRECT EXPENSES OUGHT TO BE WORKED OUT BY AO. WE ARE UNABLE TO ACCEPT ITA 4127/DEL/10 NESTLE INDIA LTD. 3 LEARNED DRS CONTENTION THAT THE SAME WORKING OF DI SALLOWANCE U/R 8-D SHOULD BE UPHELD, IN VIEW THEREOF WE SET ASIDE THE MATTER TO THE FILE OF AO TO DECIDE THE ISSUE OF ASCERTAINING INDIRECT EXPENSES QUA THE TAX FREE INCOME AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND ESTIMATE THE SAME ON A RATIONAL AND SCIENTIFIC BASIS. WE ORDER A CCORDINGLY. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 04-11-2010. SD/- SD/- (K.D. RANJAN ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04-11-2010. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR