L & T SARGENT & LUNDY LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 4303/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56004 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: HEENA DOSHI
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, A.M. AND SHRI V. DU RGA RAO, J.M. ITA NO. 4303/MUM/2010 ASSESSMENT YEAR: 2006-07 L&T SARGENT & LUNDY LTD., APPELLANT TAXATION DEPARTMENT, L&T HOUSE, N.M. MARG, BALLARD ESTATE, MUMBAI 400 001. VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 2(2), MUMBAI. APPELLANT BY : MS. HEENA DOSHI RESPONDENT BY : MR. C.G.K. NAIR ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)-5, MUMBAI, PASSED ON 19/03/2010 FOR THE A SSESSMENT YEAR 2006-07. 2. GROUND NO. 1 & 2 READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE REDUCTION OF DEP RECIATION ON COMPUTER SOFTWARE FROM 60% TO 25% BY TREATING THE S OFTWARE EXPENDITURE AS AN INTANGIBLE ASSET IN THE NATURE OF LICENSE. 2. WITHOUT PREJUDICE TO THE GROUND NO. 1, ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ER RED IN CONFIRMING THE REDUCTION OF DEPRECIATION EVEN ON OP ENING WRITTEN DOWN VALUE OF COMPUTER SOFTWARE BLOCK I.E. COMPUTER SOFTWARE PURCHASED IN EARLIER YEARS. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE TIM E OF HEARING BEFORE US, HAS NOT PRESSED THE SAID GROUNDS, THEREF ORE, THE SAME ARE DISMISSED AS NOT PRESSED. ITA NO. 4303/M/2010 L&T SARGENT & LUNDY LTD. 2 4. GROUND NO. 3 TO 5 ARE PERTAINING TO THE DISALLOW ANCE U/S 14A OF THE ACT. 5. THE AO NOTED THAT THE ASSESSEE DECLARED DIVIDEND INCOME OF RS. 3,24,338/-, WHICH WAS NOT FORMING PART OF THE TOTAL INCOME. AFTER CONFRONTING THE ASSESSEE WITH THE PROVISIONS OF SEC TION 14A, THE AO MADE DISALLOWANCE IN TERMS OF RULE 8D AT RS. 1,50,2 16/- AND THE SAME WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSE SSEE. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. AGGRIEVED, T HE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED REPRESENTATIVES OF THE PARTIES CONCE DED THAT THIS ISSUE IS COVERED BY THE JUDGEMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., [2010] 328 ITR 81 (BOM.). THE HONBLE HIGH COURT IN THE SAID CASE HE LD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HA D TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. F OR THAT PURPOSE, THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE A PPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE AO SHOULD PROV IDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA), WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE ITA NO. 4303/M/2010 L&T SARGENT & LUNDY LTD. 3 AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF NOVEMBER, 2011. SD/- SD/- (J. SUDHAKAR REDDY) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 18 TH NOVEMBER, 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.