ACIT CIR 6(3), MUMBAI V. HANIL ERA TEXTILES LTD, MUMBAI

ITA 4128/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1758 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 92

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . , ! ! ! ! , ' ' ' ' #$ %& #$ %& #$ %& #$ %& , ,, , ' ! ' ! ' ! ' ! ( ( ( ( BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 4128/MUM./2011 ( '* + ',+ / ASSESSMENT YEAR : 200708 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE6(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI .. -. / APPELLANT * V/S M/S. HANIL ERA TEXTILES LTD. 1, NEW ERA HOUSE, MUGHAL LANE MATUNGA (W), WESTERN RAILWAY MUMBAI 400 018 .... /0-. / RESPONDENT !- . / PERMANENT ACCOUNT NUMBER AAACH2154D 2!' 3 4 / REVENUE BY : MR. AJAY '* +5$ 3 4 / ASSESSEE BY : MR. NIKHIL RANJAN *' 3 $ / DATE OF HEARING 12.02.2013 % 6, 3 $ / DATE OF ORDER 22.02.2013 % % % % / ORDER #$ %& #$ %& #$ %& #$ %& , ,, , ' ! ' ! ' ! ' ! 7 7 7 7 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE REVENUE, IS AGA INST THE IMPUGNED ORDER DATED 29 TH JANUARY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XII, MUMBAI, FOR THE QUANTUM OF ASSESSMEN T PASSED UNDER SECTION M/S. HANIL ERA TEXTILES LTD. 2 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), FOR THE ASSESSMENT YEAR 200708, ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO RECOMPUTE THE DISALLOWANCE U/S 14A ON A REASONABLE BASIS RELY ING ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN GO DREJ & BOYCE MFG. LTD. WITHOUT APPRECIATING THE FACT THAT THE JUDGMEN T OF BOMBAY HIGH COURT HAS NOT BEEN ACCEPTED BY THE REVENUE AND SLP HAS BEEN PROPOSED . 2. THE ASSESSING OFFICER, IN THE PRESENT CASE, NOTED T HAT THE ASSESSEE DECLARED A SUM OF ` 32,74,921, AS DIVIDEND INCOME AND ` 87,52,106, AS LONG TERM CAPITAL GAINS FROM SALE OF SHARES WHICH HAVE B EEN CLAIMED AS EXEMPT. THE ASSESSEE, IN RESPONSE TO THE EXPLANATION SOUGHT BY THE ASSESSING OFFICER AS TO WHY THE DISALLOWANCE OF EXPENDITURE SHOULD NO T BE MADE UNDER SECTION 14A, SUBMITTED THAT NO EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING OF EXEMPT INCOME. THE ASSESSING OFFICER, AF TER APPLYING THE PROVISIONS OF RULE 8D, CALCULATED THE DISALLOWANCE OF ` 76,15,743, UNDER SECTION 14A. THE COMMISSIONER (APPEALS) HELD THAT T HE PROVISIONS OF RULE 8D, CANNOT BE APPLIED FOR THE ASSESSMENT YEAR 2007 08, THEREFORE, THE WORKING OF RULE 8D, AS APPLIED BY THE ASSESSING OFF ICER, WILL NOT BE APPLICABLE. HE, ACCORDINGLY, HELD THAT A REASONABLE AMOUNT OF DEDUCTION SHOULD BE MADE FOR MAKING THE DISALLOWANCE. HE NOTE D THAT THE ASSESSEE HAS ITSELF OFFERED ` 10,000, AS A REASONABLE AMOUNT TO BE DISALLOWED U/ A 14A, THEREFORE, THE DISALLOWANCE SHOULD BE RESTRICTED TO 10% OF THE DIVIDEND INCOME EARNED SO AS TO BE TREATED AS REASONABLE EXP ENDITURE ATTRIBUTABLE TO EARNING OF THE SAID INCOME. 3. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THAT T HE FINDINGS OF THE COMMISSIONER (APPEALS), FIRSTLY, THAT THE PROVISION S OF RULE 8D, ARE NOT APPLICABLE IN ASSESSMENT YEAR 200708 IN VIEW OF TH E JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.); AND SECONDLY, THE DISAL LOWANCE @ 10% OF THE DIVIDEND INCOME CAN BE SAID TO BE A REASONABLE BASI S ON THE FACTS FO THE CSE. M/S. HANIL ERA TEXTILES LTD. 3 THEREFORE, WE DO NOT FIND ANY REASON TO DEVIATE FRO M SUCH A FINDING GIVEN BY THE LEARNED COMMISSIONER (APPEALS). IN OUR OPINION, THERE IS NO MERIT IN THE GROUND RAISED BY THE REVENUE WHICH IS MAINLY ON THE GROUND THAT THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N GODREJ & BOYCE MFG. CO. LTD. (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMEN T AND SPECIAL LEAVE PETITION IS PENDING BEFORE THE APEX COURT. THUS, SU CH A GROUND RAISED BY THE REVENUE CANNOT BE SUSTAINED AND ACCORDINGLY THE SAM E IS DISMISSED. 4. 5 $8 2!' 3 52 * 2$ 9:; 4. IN THE RESULT, REVENUES APPEAL IS TREATED AS DI SMISSED. % 3 , < = *8 22 ND FEBRUARY 2013 3 > ; ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY 2013 SD/- . .. . ! ! ! ! B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- #$ #$ #$ #$ %& %& %& %& ' ! ' ! ' ! ' ! AMIT SHUKLA JUDICIAL MEMBER MUMBAI, = * = * = * = * DATED: 22 ND FEBRUARY 2013 % 3 /'$#? @?,$ / COPY OF THE ORDER FORWARDED TO : (1) '* +5$ / THE ASSESSEE; (2) 2!' / THE REVENUE; (3) A () / THE CIT(A); (4) A / THE CIT, MUMBAI CITY CONCERNED; (5) ?'D> /'$'* , , / THE DR, ITAT, MUMBAI; (6) >E+ F / GUARD FILE. 0?$ /'$ / TRUE COPY %* / BY ORDER / 2. G / PRADEEP J. CHOWDHURY '5H '*2 ' / SR. PRIVATE SECRETARY I / 9 2 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI