DCIT-10(3), MUMBAI V. M/S MAFATLAL FINANCE CO. LTD., NAVI MUMBAI

ITA 4377/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9227 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMANAND J
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.4377/MUM/2013 ASSESSMENT YEAR: 2006-07 THE DCIT-10(3), ROOM NO.451, 4 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI-400020 / VS. M/S MAFATLAL FINANCE COMPANY LTD. FLAT NO.K-3/4, 2 ND FLOOR, SHOPPING CENTER, SECTOR-15/16, VASHI NAVI MUMBAI-400703 ( / REVENUE) ( /ASSESSEE) P.A. NO. AAACM2824M / REVENUE BY SHRI PARMANAND J.-DR / ASSESSEE BY): NONE ! ' # / DATE OF HEARING : 25/03/2015 $%& ' # / DATE OF PRONOUNCEMENT : 25/03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER, FOR ASSESSMENT YEAR 2006-07, DATED 28/02/2013, OF THE L D. FIRST APPELLATE AUTHORITY, MUMBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT APPREC IATE THE PROVISION OF RULE 8D OF THE INCOME TAX RULES, 1962, WHILE M/S MAFATLAL FINANCE COMPANY LTD 2 WORKING OUT THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. AT THE TIME OF HEARING, THE LD. DR, SHRI PARMANA ND J. BROADLY DEFENDED THE CONCLUSION ARRIVED AT IN THE A SSESSMENT ORDER. THE ASSESSEE DID NOT APPEAR IN SPITE OF REG ISTERED AD NOTICE SENT TO IT, THEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX-PARTY QUA THE ASSESSEE AND TEND TO DISPOSE OFF T HIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT WHILE MAKING THE DISALLOWANCE, THE LD. ASSESSING OFFICER APPLIED RULE-8D-2(III) AND THEREF ORE, MADE DISALLOWANCE OF RS.17,44,490/-. ON APPEAL BEFORE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE STATEMENT OF FACTS, CLAIMED BY THE ASSESSEE, WERE DULY EXAMINED AND FOU ND THAT THE ASSESSEE CLAIMED DIVIDEND INCOME OF RS.11,37,06 8/- AS EXEMPT BY CLAIMING THAT NO EXPENSES WERE INCURRED F OR EARNING THE DIVIDEND INCOME. THE RELEVANT FINDING I N THE IMPUGNED ORDER IS REPRODUCED HEREUNDER FOR READY RE FERENCE AND ANALYSIS:- I HAVE CONSIDERED THE ASSESSING OFFICERS ORDER AN D THE APPELLANTS AR SUBMISSIONS. I HAVE ALSO TAKEN NOTE OF THE DECISION IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. VS DCIT(2010). TAKING NOTE OF THESE FACTS, I AM OF THE CONSIDERED VIEW THAT RULE 8D IS APPLICABLE ONLY FRO M AY 2008-09 ONWARDS. IN VIEW OF THE SAME, THE APPLICATI ON OF RULE 8D BY A.O. CANNOT BE UPHELD JUSTIFIED, IN VIEW OF THE AFORESAID JURISDICTIONAL HIGH COURT DECISION. HOWE VER, THE JUDGMENT OF THE HIGH COURT ALSO HELD THAT THE ASSES SING OFFICER SHOULD PROVIDE REASONABLE OPPORTUNITY TO TH E ASSESSEE WHILE WORKING OUT THE DISALLOWANCE ON ACCO UNT OF M/S MAFATLAL FINANCE COMPANY LTD 3 EXPENDITURE I.E. DIRECT/INDIRECT BOTH ON ACCOUNT OF EXEMPT INCOME, WHICH ARE NOT FORMING PART OF TOTAL INCOME. IN VIEW OF THE JURISDICTIONAL HIGH COURT DECISION, I CONSID ER IT PROPER AND APPROPRIATE TO DIRECT THE ASSESSING OFFI CER TO PROVIDE REASONABLE OPPORTUNITY TO THE APPELLANT AND WORK OUT THE TOTAL EXPENDITURE I.E. DIRECT AND INDIRECT BOTH IN RELATION TO EXEMPT INCOME AND MAKE THE DISALLOWANCE IN ACCORDANCE TO THE DECISION OF THE JURISDICTIONAL HI GH COURT IN THE CASE OF M/S GODREJ & BOYCE MFG. COMPANY LTD. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWE D. 2.1. WE NOTE THAT THE LD. COMMISSIONER OF INCOME TA X (APPEALS) FOLLOWED THE NOTIFICATION DATED 24/03/200 8 (ISSUED BY CBDT) FOR MAKING THE DISALLOWANCE U/S 14A, APPLI CABLE WITH EFFECT FROM 01/04/2007 I.E. AY 2007-08 BY WORK ING OUT THE DISALLOWANCE. THE LD. COMMISSIONER OF INCOME T AX (APPEALS), IN VIEW OF THE DECISION FROM HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE COMPANY LT D. HELD THAT RULE 8D IS APPLICABLE ONLY FROM AY 2008-09. T HE LD. ASSESSING OFFICER WAS DIRECTED TO PROVIDE REASONABL E OPPORTUNITY TO THE ASSESSEE AND WORKED OUT THE TOTA L EXPENDITURE I.E. DIRECT AND INDIRECT IN RELATION TO EXEMPT INCOME AND MAKE THE DISALLOWANCE IN ACCORDANCE WITH THE DIRECTION FROM THE HONBLE JURISDICTION HIGH COURT IN THE AFOREMENTIONED DECISIONS. WE FIND NO INFIRMITY IN THE DIRECTION BECAUSE EVEN OTHERWISE, THE DEPARTMENT IS EXPECTED TO FOLLOW SUCH DIRECTIONS FROM HIGHER AUTHORITIES T HAT TO FOLLOW THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT. HIS STAND IS AFFIRMED, CONSEQUENTLY APPEAL OF THE REVEN UE IS HAVING NO MERIT, THEREFORE, DISMISSED. M/S MAFATLAL FINANCE COMPANY LTD 4 FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 25/03/2015. ' ' $%& ( )* 25 /0 3 /2015 % ' / 0 SD/ - (D. KARUNAKARA RAO) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ! ) MUMBAI; ( ) DATED : 25/03/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. 23 45 / THE APPELLANT 2. 6745 / THE RESPONDENT. 3. ! 8 ( 23 ) / THE CIT, MUMBAI. 4. ! 8 / CIT(A)- , MUMBAI 5. :; / 6 < , 23# 2< , ! ) / DR, ITAT, MUMBAI 6. / = / GUARD FILE. / BY ORDER, 7 :3 6 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! ) / ITAT, MUMBAI