GTL LTD, NAVI MUMBAI V. ADDL CIT CIR 2(1), MUMBAI

ITA 4752/MUM/2010

• Counselvise Citation: 475219914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER I.T.A. NOS.4752 & 4753/MUM/2010 (ASSESSMENT YEARS : 2005-06 & 2006-07) M/S. GTL LIMITED, GLOBAL VISION, ES - II, MIDC TTC INDUSTRIAL AREA, MAHAPE VILLAGE, NAVI MUMBAI-400 710 PAN AAACG3742L VS. ADDL. COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MUMBAI. APPELLANT RESPONDENT. APPELLANT BY : MR. RAHUL HAKANI. RESPONDENT BY : MR. PAVAN VED. DATE OF HEARING : 22.09.2011. DATE OF PRONOUNCEMENT : 30-09-2011. O R D E R. PER P.M. JAGTAP, A.M. : THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TW O SEPARATE ORDERS OF LEARNED CIT(APPEALS)-4, MUMBAI BOTH DATED 23.4.2010 FOR ASS ESSMENT YEARS 2005-06 & 2006-07 INVOLVE COMMON ISSUE AND THE SAME THEREFORE HAVE BE EN HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ISSUE RAISED IN THE GROUND NO.1, WHICH IS IDENTICAL IN BOTH THESE APPEALS, RELATES TO THE DISALLOWANCE MADE BY THE A.O. AND CO NFIRMED BY THE LEARNED CIT(A) U/S.14A READ WITH RULE 8D OF INCOME TAX RULES, 1962. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES ESPECIALLY RELATING TO NET WORK ENGINEERING, INFORMATION TECHNOLOGY AND CALL CENTRE. THE RETURNS OF INCOME FOR THE YEARS U NDER CONSIDERATION WERE FILED BY THE 2 ITA NO.4752 & 4753/MUM/2010 ASSESSEE ON 26.10.2005 AND 19.10.2006 DECLARING LOS S OF RS.1,62,00,326 AND RS.140,69,74,708 FOR ASST. YEARS 2005-06 AND 2006-0 7 RESPECTIVELY. IN THE SAID RETURNS, THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF SU BSTANTIAL DIVIDED INCOME EARNED ON THE SHARES AND SECURITIES. NO DISALLOWANCE ON ACCOUNT ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE A. O. AS PER THE PROVISIONS OF SECTION 14A. IN ASSESSMENTS COMPLETED U/S.143(3), THE A.O. WORKED OUT SUCH EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EXEMPT INCOME BY APP LYING RULE 8D OF INCOME TAX RULES, 1962 AT RS.91,73,907 AND RS.1,02,51,100 FOR THE ASS T. YEARS 2005-06 AND 2006-07 RESPECTIVELY AND DISALLOWANCE TO THAT EXTENT WAS MA DE BY HIM U/S.14A. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. U/S.14A READ WITH RULE 8D FOR BOTH THE YEARS UNDER CONSIDERATION RELYING O N THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PRIVATE LTD REPORTED IN 117 ITD 169 (MUM) (SB) WHEREIN IT WAS HELD THAT RULE 8D HAS A RETROSP ECTIVE APPLICATION. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH TH E SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRE SENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN THESE APPEALS NOW STANDS SQUARELY COVER ED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURIN G CO. LTD. REPORTED IN 234 CTR (BOM) 1 WHEREIN IT IS HELD THAT RULE 8D OF INCOME TAX RUL ES, 1962 IS APPLICABLE ONLY FROM ASST. YEAR 2008-09. AS PER THE DECISION OF THE HONBLE B OMBAY HIGH COURT, THE DISALLOWANCE U/S.14A FOR THE YEARS PRIOR TO A.Y. 2008-09 IS REQU IRED TO BE MADE BY ADOPTING SOME REASONABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A.O. WITH A DIREC TION TO RECOMPUTE THE DISALLOWANCE OF EXPENSES TO BE MADE U/S.14A BY APPLYING SOME REASON ABLE METHOD AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. GROUND NO.1 OF BOTH THE APPEALS IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 3 ITA NO.4752 & 4753/MUM/2010 5. THE ISSUE RAISED IN GROUND NO.2, WHICH IS AGAIN IDENTICAL IN BOTH THESE APPEALS, RELATES TO THE ADDITION MADE BY THE A.O. AND CONFIR MED BY THE LEARNED CIT(A) ON ACCOUNT OF DISALLOWANCE U/S.14A READ WITH RULE 8D WHILE COM PUTING BOOK PROFIT OF THE ASSESSEE COMPANY U/S.115JB. 6. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE HAS SUBMITTED SINCE A SIMILAR ISSUE RELATING TO DISALLO WANCE MADE U/S.14A WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE UNDER THE NORMAL PROVI SIONS OF THE ACT AS INVOLVED IN GROUND NO.1 IS BEING SENT BACK TO THE A.O., THE ISSUE INVO LVED IN GROUND NO.2 MAY ALSO BE SENT BACK TO THE A.O. FOR DECIDING THE SAME AFRESH IN AC CORDANCE WITH LAW. SINCE THE LEARNED D.R. HAS NOT RAISED ANY OBJECTION IN THIS REGARD, W E SET ASIDE THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A.O. FOR DECIDING THE SAME AFRESH IN ACCORDANCE WITH LAW. GROUND NO.2 OF ASSESSEES APPEALS IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPT., 2011 . SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED: 30 TH SEPT., 2011. *REDDY GP 4 ITA NO.4752 & 4753/MUM/2010 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI