UDANI CORPORATION, MUMBAI V. ACIT 12(2), MUMBAI

ITA 447/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3730 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P PEERYA
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 447/MUM/2010 (ASSESSMENT YEAR 2006-07) UDANI CORPORATION 17 MAKER CHAMBER VI 220, JAMANALAL BAJAJ ROAD NARIMAN POINT MUMBAI-400021 PAN: AAAFU8868L . APPELLANT VS ACIT 12(2), MUMBAI RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI P PEERYA O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 6.11.2009 OF THE LEARNED CIT(A)-23 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS FOLLOWING GROUNDS IN THIS APPEA L: 1. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF ` .10,84,076/- U/S 14A. 2. THE CIT(A) OUGHT NOT TO HAVE CONFIRM THE DISALLOWANCE OF ` .10,84,076 U/S 14A ON THE FACTS OF THE CASE WITHOUT PREJUDICE ITA NO. 447/MUM/2010 (ASSESSMENT YEAR 2006-7) 2 3. THE CIT(A) ERRED IN NOT CONSIDERING THE STATEMENT OF WORKING OF DISALLOWANCE OF ` .5,95,176/- AS PER RULE 8D SUBMITTED IN THE COURSE OF HEARING; 4. ALTERNATIVELY CIT(A) OUGHT TO HAVE DIRECTED THE AO TO MAKE THE DISALLOWANCE AS PER RULE 8D 3. THE ASSESSEE FILED A REQUEST LETTER FOR ADJOURN MENT. HOWEVER, WE HAVE REJECTED THE APPLICATION FOR ADJO URNMENT BECAUSE THE ISSUE RAISED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. 4. WE HAVE HEARD THE LEARNED DR AND CONSIDERED THE RELEVANT RECORD. THE AO NOTED THAT THE ASSESSEE HA S CLAIMED EXEMPTION OF DIVIDEND INCOME AS WELL AS LONG TERM C APITAL GAIN ON SALE OF SHARES ETC. THE ASSESSEE DEBITED THE E XPENDITURE OF DIVIDEND AGAINST THE TAXABLE BUSINESS INCOME. THE AO DID NOT FIND MERIT IN THE CLAIM OF THE ASSESSEE, AC CORDINGLY, THE AO DISALLOWED THE PROPORTIONATE EXPENSES OF THE EXP ENDITURE OF ` .10,84,076/- BY APPLYING THE PROVISIONS OF SECTION 14A 5. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWA NCE MADE BY THE AO.. 6. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS COVERE D BY THE DECISION OF THE HON. JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFT. CO.PVT LTD V/S CIT REPORTED I N 234 DTR (BOM)-1. THE HON. JURISDICTIONAL HIGH COURT HAS H ELD THAT THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962 ARE APPLICABLE ONLY FROM 1 ST APRIL 2007 AND THEREFORE, WE DO NOT ITA NO. 447/MUM/2010 (ASSESSMENT YEAR 2006-7) 3 INCLINE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE DISALLOWANCE SHOULD BE MADE AS PER RULE 8D. WE FU RTHER NOTE THAT THE AO HAS WORKED OUT THE PROPORTIONATE E XPENDITURE TO BE DISALLOWED U/S 14A IN THE RATIO OF EXEMPT IN COME TO TOTAL INCOME. IN OUR VIEW THE RATIO OF INCOME IS NOT PRO PER AND REASONABLE BASIS FOR THE APPORTIONMENT OF THE EXPEN DITURE FOR THE REASONS THAT IF THERE IS NO INCOME OR LOSS OUT OF A PARTICULAR ACTIVITY OF THE BUSINESS OF THE ASSESSEE THEN THERE WOULD BE NO EXPENDITURE ATTRIBUTABLE TO THE SAID A CTIVITY OF THE BUSINESS. THUS, IN VIEW OF THE DECISION OF THE HO N. JURISDICTIONAL HIGH COURT (SUPRA), WE REMIT THIS IS SUE TO THE FILE OF THE AO TO BE DECIDED THE SAME BY FOLLOWING THE REASONABLE METHOD OF APPORTIONMENT OF THE EXPENDITURE AFTER CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE.. NEEDLESS TO SAY, THE AO WILL AFFORD FAIR AND REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE BEFORE PASSING THE ORDER. 7. IN VIEW OF OUR DISCUSSION, THE APPEAL OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10.11.2010 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNT ANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10 TH NOV 2010 SRL:11110 ITA NO. 447/MUM/2010 (ASSESSMENT YEAR 2006-7) 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI