W.H. BRADY & CO. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 4726/MUM/2010

• Counselvise Citation: 472619914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: R C JAIN
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 4726/MUM/2010 ASSESSMENT YEAR-2007-08 M/S. W.H. BRADY & CO. LTD., 12-14, 4 TH FLOOR, BRADY HOUSE, V.N. ROAD, FORT, MUMBAI-400 001 PAN-AAACW 0913B VS. THE ACIT 2(3), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.C. JAIN RESPONDENT BY: SHRI A.K. NAYAK O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 16.4.2010 PASSED BY THE LD. CIT(A)-6 FOR THE ASSESS MENT YEAR 2007-08. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE U/S. 14A OF THE ACT. THE AO HAS COMPU TED THE DISALLOWANCE U/S. 14A. 3. THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE HAS EARNED DIVIDEND OF RS. 9,89,913/-. THE SAME HAS BEEN CLAIMED AS EX EMPT U/S./ 10(34) OF THE ACT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 26,22,891/- UNDER THE HEAD INTEREST. IT IS FURTH ER SEEN FROM THE SCHEDULE-O THAT A SUM OF RS. 1,20,853/- WAS INTEREST ON VEHICLE LOA NS DEPOSITS AND SALES TAX PENALTY. THE ASSESSEE WAS THEREFORE, REQUESTED TO SHOW CAUSE AS TO WHY THE ITA NO. 4726/M/2010 2 EXPENDITURE SHOULD NOT BE DISALLOWED U/S. 14A R.W. RULE 8D OF I.T. RULES, 1962. IN RESPONSE, THE ASSESSEE VIDE LETTER DT. 11.9.2009 IN PARA 2 HAS STATED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING THE EXEMPT INCOME, HOWEVER, THE DISALLOWANCE U/S. 14A WILL BE CONSIDER ED AS PER RULES. IN THE CIRCUMSTANCES, FOLLOWING THE DECISION OF SPECIAL BE NCH, MUMBAI HONBLE ITAT IN THE CASE OF M/S. DAGA CAPITAL MANAGEMENT PVT. LTD. AND OTHERS A SUM OF RS. 51,313/- IS DISALLOWED U/S. 14A OF THE I.T. ACT, 19 61 R.W. RULE 8D OF THE I.T. RULES. 3. THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL B Y OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR. THERE IS NO MERIT IN THE SUBMISSIONS OF THE AR THAT THE PROVISIONS OF RULE 8D COULD NOT APPLY TO THE CURREN T CASE SINCE THE VIRES OF THE SAID RULE HAD BEEN QUESTIONED BEFORE THE HONBL E BOMBAY HIGH COURT. TILL SUCH TIME AS THE HONBLE HIGH COURT GIVES A JU DGEMENT IN FAVOUR OF THE APPELLANT, THE DECISION OF THE SPECIAL BENCH OF ITA T MUMBAI STILL HOLDS GROUND. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION OF MAKING DI SALLOWANCE U/S. 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. VS DCIT (2010) 238 ITR 81 (BOM) HOLDING THAT THE PROVISIONS OF SEC. 14A ARE APPLICABLE IN CIRCUMSTAN CES AS ARE PREVAILING PRESENTLY AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME REASONABLE BASIS AND NOT RULE 8D. UNDER SUCH CIR CUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE O F THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE, AS PER THE AFORE-NOTED JUD GMENT, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. ITA NO. 4726/M/2010 3 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATED 15 TH JULY, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 4726/M/2010 4 DATE INITIALS 1. DRAFT DICTATED ON: 12.6.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 13.07.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: