NRB BEARINGS LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 4301/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6742 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: V A M ITTAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 4301/MUM/2010 ASSESSMENT YEAR : 2006-07. NRB BEARINGS LTD., DY. COMMISSIONER OF INCOME- TAX, 15, DHANNUR, SIR P.M. ROAD, VS. RANGE-2(2), MUMBAI. MUMBAI 400 001. PAN AAACN 3479P APPELLANT. RESPONDENT. APPELLANT BY : SHRI V.A. MITTAL. RESPONDENT BY : SHRI JITENDRA YADAV. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED CIT(APPEALS)-5, MUMBAI DATED 24-02-2010 AND THE SOL ITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS.44,91,000/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) U/S 14A READ WITH RULE 8D OF INCOME TAX RULES, 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS MAINLY ENGAGED IN THE BUSINESS OF MANUFACTURING, SELLING AND INDENTIN G OF BEARINGS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 28-11-2006 DECLARING A TOTAL INCOME OF RS.48,03,01,875/-. IN THE SAID RETU RN, THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF DIVIDEND INCOME OF RS.10,33 ,000/-. NO DISALLOWANCE ON 2 ITA NO.4301/MUM/2010 ASSESSMENT YEAR : 2006-07. ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS PER THE PROVIS IONS OF SECTION 14A. IN THE ASSESSMENT COMPLETED U/S 143(3), THE AO WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EXEMPT INCOME AT RS.44, 91,000/- BY APPLYING RULE 8D OF INCOME-TAX RULES, 1962 AND DISALLOWED THE SAID AMOU NT U/S 14A. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANC E MADE BY THE AO U/S 14A READ WITH RULE 8D RELYING ON THE DECISION OF SPECIA L BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT P. LTD. 117 ITD 169 (MUM.)( S.B.) WHEREIN IT WAS HELD THAT RULE 8D HAS A RETROSPECTIVE APPLICATION. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRES ENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN THIS APPEAL NOW STANDS SQUARELY C OVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MANUFACTURING CO. LTD. (2010) 234 CTR (BOM) 1, WHEREIN IT HAS BEEN HELD TH AT RULE 8D OF INCOME-TAX RULES, 1962 IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2007-08. AS FURTHER HELD BY HONBLE HIGH COURT, THE DISALLOWANCE U/S 14A FOR TH E YEARS PRIOR TO ASSESSMENT YEAR 2007-08 HAS TO BE MADE BY ADOPTING SOME REASON ABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTION AL HIGH COURT, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE TH E DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY APPLYING SOME REASONABLE METHOD AFT ER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 3 ITA NO.4301/MUM/2010 ASSESSMENT YEAR : 2006-07. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 22 ND DAY OF JULY, 2011. SD/ SD/- (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED: 22 ND JULY, 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR, ITAT, MUMBAI BEN CHES, MUMBA I.