LIC HOUSING P. LTD, MUMBAI V. ACIT 2(2), MUMBAI

ITA 4732/MUM/2010

• Counselvise Citation: 473219914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 08-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANTAN BOSE
• Assessee Lawyers: SUNIL BHANDARI
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA. NO. 4732/MUM/2010 ASSESSMENT YEAR 2004-2005 LIC HOUSING FIN. LTD. MUMBAI. PAN AAACL1799C VS. DCIT 2 (2) MUMBAI. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI SUNIL BHANDARI FOR RESPONDENT : SHRI SHANTAN BOSE DATE OF HEARING : 20-09-2011 DATE OF PRONOUNCEMENT : 23-09-2011 ORDER PER D.MANMOHAN, V.P. 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSE D BY THE CIT(A)-V, MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-2005. 2. THIS IS A COMPANY PROMOTED BY LIC OF INDIA AND IT IS ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM HOUS ING FINANCE WITH A FOCUS ON INDIVIDUAL HOUSING. IN THE RETURN FILED FO R THE FINANCIAL YEAR 2003-2004, THE ASSESSEE HAS DECLARED DIVIDEND AND I NTEREST INCOME FROM TAX FREE BONDS AND CLAIMED AS EXEMPT UNDER SEC TION 10 (33) AND 10(15) OF THE INCOME TAX ACT, 1961. SINCE THE ASSES SEE CLAIMED THE ABOVE AMOUNT AS EXEMPT, ADMITTEDLY PROVISIONS OF SE CTION 14A ARE APPLICABLE. THE ASSESSEE, HOWEVER, SUBMITTED THAT A LL THE INVESTMENTS OF THE COMPANY HAVE BEEN MADE OUT OF ITS OWN FUNDS AND HENCE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. THE A SSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE. HE OBSERVE D THAT THE EXPRESSION IN RELATION TO USED IN SECTION 14A OF THE ACT REFERS TO EXPENDITURE INCURRED TO EARN EXEMPT INCOME ALSO. AP PLYING THE PROVISIONS OF SECTION 14A HE DISALLOWED A SUM OF RS .1.79 CRORES STATED 2 TO HAVE BEEN RELATABLE TO EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. 3. ON AN APPEAL FILED BY THE ASSESSEE, THE LEARNED CIT(A) APPLIED THE DECISION OF THE ITAT, MUMBAI SPECIAL BE NCH IN THE CASE OF ITO, MUMBAI VS. DAGA CAPITAL MANAGEMENT (P) LTD. (2 009) 117 ITD 169 (SB) (MUM.) AND HELD THAT RULE 8D IS RETROSPECT IVE IN OPERATION AND AMOUNT DISALLOWABLE UNDER SECTION 14A HAS TO BE COMPUTED IN ACCORDANCE THEREOF. IN HIS OPINION A SUM OF RS.4.30 CRORES IS DISALLOWABLE AS AGAINST RS.1.79 CRORES DISALLOWED B Y THE ASSESSING OFFICER. 4. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A) AS WELL AS THE ORDER OF THE ASSESSING OFFICER, ASSESSEE PREFERRED AN APPEAL BEFORE US. LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSE E, SUBMITTED THAT IN ORDER TO EARN EXEMPT INCOME SUCH AS INTEREST FRO M TAX FREE BONDS AND DIVIDEND IT IS NOT NECESSARY FOR THE ASSESSEE T O INCUR SUCH A HUGE EXPENDITURE. AT ANY RATE RULE 8D IS NOT RETROSPECTI VE IN OPERATION IN THE LIGHT OF DECISION OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT AND ANOTHER ( 2010) 328 ITR 81 (BOM.) THEREFORE, HE REQUESTED FOR A SUITABLE DIREC TION TO THE ASSESSING OFFICER TO RE-COMPUTE THE AMOUNT DISALLOW ABLE UNDER SECTION 14A OF THE ACT, KEEPING IN MIND THE CIRCUMS TANCES OF THE CASE. 5. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED U PON THE ORDER PASSED BY THE ASSESSING OFFICER/CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IN THE LIGHT OF DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. (SUPRA) RULE 8D HAS BEEN INTRODUCED TO BE APPLICABLE PROSPECTIVE LY FROM 24-3-2008 AND HENCE IT IS NOT APPLICABLE TO THE ASSESSMENT YE AR UNDER CONSIDERATION. HAVING REGARD TO THE CIRCUMSTANCES T HE ASSESSING OFFICER IS DIRECTED TO RECONSIDER THE AMOUNT DISALL OWABLE UNDER SECTION 3 14A WITHOUT TAKING AID OF RULE 8D OF THE INCOME TAX RULES. ACCORDINGLY, WE HEREBY SET ASIDE THE ORDER OF THE C IT(A) AND THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 2 3 RD DAY OF SEPTEMBER, 2011. SD/- SD/- (RAJENDRA SINGH) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 23 RD SEPTEMBER, 2011 VBP/- COPY TO 1. LIC HOUSING FIN. LTD., BOMBAY LIFE BUILDING, 2 ND FLOOR, 45/47 VEER NARIMAN POINT, MUMBAI. PAN AAACL1799C 2. DCIT 2(2), ROOM NO. 545, AAYAKAR BHAVAN, M.K. RO AD, MUMBAI. 3. CIT(A)-5, MUMBAI. 4. CIT-2, MUMBAI 5. DR A BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.