ACIT, New Delhi V. M/s. Green Max Estates Pvt. Ltd., New Delhi

ITA 4234/DEL/2011

• Counselvise Citation: 423420114 RSA 2011
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI C.L. SETHI, JUDICIAL MEMBER I.T. A. NO.4234/DEL/2011 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX, M/S. GREEN MAX E STATES PVT. LTD, CIRCLE 12(1), NEW DELHI. VS. C-8/1-A, VASANT VIHAR , NEW DELHI. PAN: AABCG5082A (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI SALIL MISHRA, SR. DR. RESPONDENT BY : SHRI U.N. MARWAH, FCA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER IN THIS APPEAL FILED BY THE REVENUE AGAINST THE ORD ER DATED 13.06.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) PERTAINING TO ASSESSMENT YEAR 2007-08, THE SOLITARY GROUND TAKEN BY THE REVENUE IS AS UNDER:- WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW IN DELETING THE DISALLOWANCE OF RS.11,90,423/- ON ACCOUNT OF EXPENSES INCURRED FOR EARNING EXEMPTED INCOME MADE BY THE AO U/S 14A READ WITH RU LE 8D. 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. 2 3. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE A SSESSEE HAS EARNED DIVIDEND INCOME OF RS.27,74,840/- FROM MUTUAL FUND AND CLAIMED THE SAME TO BE EXEMPTED FROM TAX. THE AO WORKED OUT AN AMOU NT OF RS.11,90,423/- BEING AN EXPENDITURE ALLEGEDLY INCURRED BY THE ASSE SSEE IN EARNING THE DIVIDEND INCOME BY APPLYING THE METHOD PRESCRIBED U NDER RULE 8D OF THE INCOME-TAX RULES READ WITH SEC. 14A OF THE ACT. HO WEVER, ON AN APPEAL, THE LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING TH AT RULE 8D READ WITH SEC. 14A(2) IS NOT APPLICABLE TO THE ASSESSMENT YEA RS PRIOR TO THE ASSESSMENT YEAR 2008-09 AS SO HELD BY THE HONBLE B OMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (2010) 328 ITR 81. THE LEARNED CIT(A) FURTHER HELD THAT IN RESPECT OF EARLIER YEAR S PRIOR TO THE ASSESSMENT YEAR 2008-09, THE DISALLOWANCE UNDER SEC. 14A HAS T O BE WORKED OUT ON REASONABLE BASIS KEEPING IN VIEW THE PROXIMITY BETW EEN EXPENDITURE AND EXEMPT INCOME. THE LEARNED CIT(A) FOUND THAT THE A SSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPTED DIVID END INCOME AND, THERE CANNOT BE ANY PRESUMPTION THAT THE ASSESSEE MUST HA VE INCURRED EXPENDITURE TO EARN TAX-FREE INCOME. THE LEARNED CIT(A) THEREF ORE, DELETED THE ADDITION. HENCE, THE REVENUE IS IN APPEAL BEFORE US. 4. IN THE COURSE OF HEARING, A RECENT UNREPORTED DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT L TD. VS. CIT HAS BEEN 3 PLACED BEFORE US, WHERE THE HONBLE DELHI HIGH COUR T HAS ALSO TAKEN A VIEW THAT RULE 8D INSERTED ON 24.03.2008 WOULD OPERATE P ROSPECTIVELY FROM THE ASSESSMENT YEAR 2008-09 AND, FOR PERIODS PRIOR TO R ULE 8D, THE AO WILL HAVE TO ADOPT A REASONABLE METHOD ON THE BASIS OF O BJECTIVE CRITERIA TO DETERMINE THE EXPENDITURE. HOWEVER, THE AO WILL HA VE TO SHOW AS TO WHY HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASS ESSEES CLAIM THAT NO EXPENDITURE HAS ACTUALLY BEEN INCURRED FOR EARNING THE EXEMPT INCOME. 5. IN THE LIGHT OF RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (UNREPORTED), WE RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AS TO WHET HER ANY AMOUNT OF EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN RE LATION TO EXEMPT DIVIDEND INCOME AND IN THAT PROCESS, THE ASSESSING OFFICER S HALL ADOPT A REASONABLE METHOD ON THE BASIS OF OBJECTIVE CRITERIA TO DETERM INE THE EXPENDITURE. THE ASSESSEE SHALL BE AT LIBERTY TO PLACE BEFORE THE AO ANY SUCH EVIDENCES OR DETAILS ON WHICH THE ASSESSEE MAY WISH TO RELY IN S UPPORT OF ITS CLAIM THAT NO EXPENDITURE RELATING TO THE EXEMPT INCOME WAS INCUR RED BY THE ASSESSEE SO AS THE SAME IS LIABLE TO BE DISALLOWED UNDER SEC. 14A OF THE ACT. THE AO SHALL PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS UNDERSTANDING THAT THE MATTER IS BEING RESTORED BAC K TO THE FILE OF THE 4 ASSESSING OFFICER WAS GIVEN TO BOTH THE PARTIES AT THE TIME OF HEARING, TO WHICH BOTH THE PARTIES HAD AGREED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED TO BE ALLOWED FOR A STATISTICAL PURPOSE. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT I MMEDIATELY AFTER THE HEARING WAS OVER ON 22 ND NOVEMBER, 2011. SD/- SD/- (G.D. AGRAWAL) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 22 ND NOVEMBER , 2011 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.