PTC India Ltd., New Delhi V. DCIT, New Delhi

ITA 4571/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0178 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MEHTA
• Assessee Lawyers: BANITA DEVI NAROREM
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 4571 & 4572/DEL/10 ASSTT. YR: 2006-07 & 2007-08 PTC INDIA LTD., VS. DCIT CIR. 14(1), 2 ND FLOOR, NBCC TOWER, NEW DELHI. 15, BHIKAJI CAMA PLACE, NEW DELHI. PAN/ GIR NO.AABCP7947F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.M. MEHTA ADV. ASSESSEE BY : SMT. BANITA DEVI NAROREM SR. DR O R D E R PER R.P. TOLANI, J.M: : THESE ARE ASSESSEES APPEALS AGAINST SEPARATE ORDER S OF CIT(A) RELATING TO A.Y. 2006-07 & 2007-08. 2. COMMON GROUND RAISED IN BOTH THE APPEALS, EXCEPT ING QUANTUM, IS AS UNDER: WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 1,64,28,214/- (FOR A.Y. 2006-07); AND RS. 61.75 LAC S FOR A.Y. 2007-08, MADE BY THE AO BY APPLYING RULE 8D UNDER S ECTION 14A? 3. LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET CONTENDS THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE RATIO OF DEC ISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. (SUPRA), HOLDING RULE 8-D TO BE APPLICABLE PROSPECTIVELY W.E.F. A.Y. 2008-09 ONWARDS. THE ASSESSMENT YEARS INVOLVED IN THESE APPEALS BEING A. Y. 2006-07 & 2007-08, 2 I.E. PRIOR TO THE INSERTION OF RULE 8-D, WHAT CAN B E DISALLOWED U/S 14A IS INDIRECT EXPENSES WHICH MAY BE ATTRIBUTABLE TO EARN ING OF TAX FREE INCOME. HE SUBMITTED THAT IN VIEW OF ABOVE THE ISSUE MAY B E SET ASIDE, RESTORED BACK TO THE FILE OF AO TO WORK OUT THE INDIRECT EXPENSES , IF ANY. 4. LEARNED DR, ON THE OTHER HAND, CONTENDS THAT HON BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT & ANR. (2010) 234 CTR 1, HAS NOT HELD THAT RULE 8-D IS REASONABLE . ONLY ITS APPLICATION HAS BEEN HELD TO BE PROSPECTIVE. DISALLOWANCE OF IN DIRECT EXPENSES ON A REASONABLE BASIS HAS NOT BEEN DISAPPROVED BY THE HO NBLE MUMBAI HIGH COURT. SINCE RULE 8-D HAS NOT BEEN HELD TO BE UNREA SONABLE IN THIS CASE, IT CAN BE APPLIED TO EARLIER YEAR ALSO. 5. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE GONE TH ROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. HONBLE MUMBAI HIGH C OURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA), HAS HELD RULE 8-D TO BE APPLICABLE FROM PROSPECTIVE EFFECT AND WHAT CAN BE DISALLOWED U/S 14A IS INDIRECT EXPENSES WHICH MAY BE ATTRIBUTABLE TO EARNING OF TA X FREE INCOME. IN VIEW THEREOF WE SET ASIDE THE MATTER FOR BOTH THE ASSESS MENT YEARS IN QUESTION TO THE FILE OF AO TO DECIDE THE ISSUE OF ASCERTAINING INDIRECT EXPENSES QUA THE TAX FREE INCOME AFTER GIVING THE ASSESSEE AN OPPORT UNITY OF BEING HEARD AND ESTIMATE THE SAME ON A RATIONAL AND SCIENTIFIC BASI S. WE ORDER ACCORDINGLY. 6. THE REMAINING GROUND FOR ADJUDICATION IN A.Y. 20 07-08 IS AS UNDER: 3 WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING RS. 3.60 LACS FOR EXPENSES RELATED TO THE YEAR BUT BOOKED IN NEXT YEARS ACCOU NT AND ADDED BACK IN THE TOTAL INCOME OF THE NEXT ASSTT. YR. 200 8-09? 7. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ASSESSEE AS A REGULAR PRACTICE GOT ITS ACCOUNTS AUDITED AS EARLY AS AFTER THE FINALISATION OF ACCOUNT OF ACCOUNTS FOR A.Y. 2007-08. SOME OF EXPEN DITURE RELATABLE TO A.Y. 2007-08 WAS PAID IN A.Y. 2008-09. IT IS FAIRLY CONCEDED THAT THE ASSESSEE COULD NOT MAKE A PROVISION OF THESE EXPENS ES IN A.Y. 2007-08. THUS, THE EXPENDITURE IN QUESTION STANDS DEBITED IN THE BOOKS OF ACCOUNT FOR A.Y. 2008-09 AND RETURN FOR A.Y. 2008-09, WHERE THE EXPENSES HAVE NOT BEEN ALLOWED BY AO HOLDING THE SAME TO BE RELATABLE TO A.Y. 2007-08. IN AY 2007-08 ASSESSEE FILED A LETTER DATED 10-9-09 BE FORE THE AO GIVING THE DETAILS OF EXPENDITURE WITH A REQUEST TO ALLOW THE SAME IN A.Y. 2007-08. THE FINDING OF CIT(A) IN PARA 3.2 OF HIS ORDER THAT NO EVIDENCE WAS FURNISHED BEFORE LOWER AUTHORITIES INASMUCH AS THE AO HAS NOT CONSIDERED THIS LETTER DATED 10-9-2009, COPY OF WHICH IS PLACE D ON RECORD, IT IS PLEADED THAT CLAIM OF EXPENDITURE IN A.Y. 2008-09 HAS NOT B EEN ALLOWED HOLDING THE EXPENDITURE TO BE RELATABLE TO A.Y., 2007-08 AND IN AY 2007-08 THE SAME HAS NOT BEEN ALLOWED. THIS HAS RESULTED IN HARDSHIP TO ASSESSEE INASMUCH AS ITS VALID CLAIM HAS NOT BEEN EXAMINED IN A PROPER PERSPECTIVE. 4 8. LEARNED DR ON THE OTHER HAND, CONTENDS THAT THE ASSESSMENT ORDER WAS FRAMED ON 21-10-2009. THE ALLEGED LETTER DATED 10-9 -2009 CLAIMED TO BE FILED BEFORE AO DOES NOT BEAR ANY STAMP RECEIPT, TH EREFORE, IT IS NOT CLEAR WHETHER THIS LETTER WAS FILED BEFORE THE CLOSING OF THE ASSESSMENT PROCEEDINGS BEFORE AO OR NOT. ORDER OF CIT(A) IS RELIED ON. 9. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE GONE TH ROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. ASSESSEE IN THE FIRST APPEAL HAS RAISED THE ISSUE ABOUT NOT ADMITTING THE CLAIM ABOUT EXPENDITURE OF RS. 3.60 LACS. CIT(A) HAS REJECTED THE CLAIM BY FOLLOWING OBSERVATIONS: IT IS SEEN FROM THE BREAK UP FILED BY THE APPELLAN T COMPANY, THE ADDITIONAL CLAIM HAS BEEN MADE OF RS. 3,00,000/ - UNDER THE HEAD BUSINESS DEVELOPMENT EXPENSES AND RS. 60,000/- UNDER OTHER HEADS SUCH AS LEGAL EXPENSES, COMMUNICATION A ND REVERSAL OF INTEREST. THE APPELLANT HAS HOWEVER NOT FURNISHE D EITHER BEFORE ME OR BEFORE THE AO ANY DETAIL, DOCUMENTARY EVIDENCE OR JUSTIFICATION FOR THE ALLOWABILITY OF ABOVE EXPE NSES ON MERIT. THEREFORE, THERE IS NO WAY FOR ME TO ALLOW THE CLAI M OF THE APPELLANT. IN VIEW OF THE ABOVE, THIS GROUND OF APP EAL IS REJECTED. 9.1. THE ALLEGED LETTER DATED 10-9-09 MENTIONING A VAGUE CLAIM, DOES NOT SPECIFY WHAT TYPE OF EXPENDITURE WHICH IS BOOKED IN SUBSEQUENT YEAR CRYSTALLIZES IN THIS ASSESSMENT YEAR. BESIDES, THE ENCLOSURES ARE NOTHING BUT STATEMENT OF TAXABLE INCOME WHICH CONTAINS A VAGUE REFERENCE TO EXPENDITURE OF RS. 13,68,587/- AND NOT THE SPECIFIC ITEMS ABOUT RS. 3,60,000/-. THE OTHER 5 PAPERS ENCLOSED ARE COMPUTATION OF CAPITAL GAINS AN D COMPUTATION FOR A.Y. 2008-09. IN THE LIGHT OF THESE FACTS, WE SEE NO RE ASON TO INTERFERE WITH CIT(A)S FINDING THAT NO DOCUMENTARY EVIDENCE, DETA ILS OR JUSTIFICATION OF ALLOWABILITY OF EXPENSES WERE FILED TO EXAMINE THE ASSESSEES CASE ON MERITS. IN VIEW OF ABOVE, WE SEE NO REASON TO INTERFERE WIT H THE FINDING OF LEARNED CIT(A) ON THE ISSUE IN QUESTION. GROUND IS DISMISSE D. 10. IN THE RESULT ITA NO. 4571/DEL/10 IS ALLOWED FO R STATISTICAL PURPOSES AND ITA NO. 4572/DEL/10 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 21-04-2011. SD/- SD/- ( B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21-04-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR