ITO 6(1)(1), MUMBAI V. AAJIWAN INDUSTRIES LTD, MUMBAI

ITA 4491/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59953 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIM KUMAR MODI
• Assessee Lawyers: P J PARDIWALA
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 4491/MUM/2010 ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER-6(1)-1, APPELLANT AAYAKAR BHAVAN, MUMBAI 400 020. VS. AAJIWAN INDUSTRIES LTD., RESPONDENT 303-304A, A TO Z INDUSTRIAL ESTATE, LOWER PAREL, G.K. MARG, MUMBAI 400 013 (PAN AABCA 8046Q) APPELLANT BY : MR. ASHIM KUMAR MODI RESPONDENT BY : MR. P.J. PARDIWALA DATE OF HEARING : 27/03/2012 DATE OF PRONOUNCEMENT : 30/03/201 2 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-14, MUMBAI, PASSED ON 30/03/2010 FOR THE ASS ESSMENT YEAR 2006-07, WHEREIN THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DIS ALLOWANCE MADE U/S 14A, WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE HAD FAILED TO ESTABLISH BEYOND DOUBT THAT THE INTEREST BEARING FUNDS WERE NOT UTILIZED FOR INVESTMENT IN SHARES AND EARN ING DIVIDEND THEREON. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . ITA NO. 4491/MUM/10 M/S AAJIWAN INDUSTRIES LTD. 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4,96,918/- ON 18/11/2006, WHICH WAS PROCESSED U/S 1 43(1) AND ASSESSMENT WAS COMPLETED U/S 143(3) ON 19/11/2008 D ETERMINING THE TOTAL INCOME AT RS. 15,42,950/-. THE ASSESSEE HAD EARNED INCOME OF RS. 5,18,238/- FROM DIVIDEND WHICH IS CLAIMED EXEMP T. SINCE NO EXPENDITURE HAD BEEN APPORTIONED TOWARDS T HE SAID DIVIDEND INCOME, THE AO ASKED THE ASSESSEE VIDE NOTICE U/S 1 42(1) DATED 06/06/08 AS TO WHY THE PROVISIONS OF SECTION 14A SH OULD NOT BE INVOKED IN RESPECT OF DIVIDEND INCOME CLAIMED EXEMP T AND WHY THE DISALLOWANCE U/S 14A SHOULD NOT BE MADE AS PER RULE 8D. IN REPLY, THE ASSESSEE SUBMITTED THAT THE TOTAL INTEREST PAYM ENT IS LESS THAN INTEREST EARNED, THEREFORE, QUESTION OF DISALLOWANC E OF PART OF INTEREST PAYMENT DOES NOT ARISE AS THE ASSESSEES OWN CAPITA L, RESERVES AND SURPLUS AND CURRENT LIABILITIES ARE SUFFICIENT FOR THE INVESTMENT AND CURRENT ASSETS. HE, THEREFORE, POINTED OUT THAT THE RE IS NO INTEREST IMPACT ON PART OF INVESTMENTS. HOWEVER, THE AO AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE SPECI AL BENCH DECISION OF ITAT (90 ITD 579) COMPUTED THE DISALLOWANCE U/S 14A AS PER THE METHOD LAID DOWN IN RULE 8D OF RS. 10,86,871/- BEIN G THE EXPENDITURE ATTRIBUTABLE TO EARNING OF TAX FREE DIV IDEND. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 59,512/- ON ACCO UNT OF ADMINISTRATIVE EXPENSES IN RESPECT OF DIVIDEND INCO ME. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL B EFORE US. 3. AT THE TIME HEARING BEFORE US, BOTH THE PARTIES HAVE AGREED THAT THE DISALLOWANCE TO THE EXTENT OF RS. 1.00 LAKH MAY BE MADE. AFTER CONSIDERING THE FACTS OF THE CASE, DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES IN EARNING THE DIVIDEND INC OME TO THE EXTENT OF RS. 1,00,000/- IS SUFFICIENT TO MEET THE ENDS OF JUSTICE. THEREFORE, ITA NO. 4491/MUM/10 M/S AAJIWAN INDUSTRIES LTD. 3 WE DIRECT THE AO TO DISALLOW RS. 1,00,000/- ON THIS COUNT AND THE ORDER OF THE CIT(A) IS MODIFIED ACCORDINGLY. 4. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. PRONOUNCED IN THE OPEN COURT ON 30/03/2012. SD/- SD/- (G.E. VEERABHADRAPPA) ( V. DURGA RAO) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED: 30/03/2012 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.