PMT MACHINES LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 4755/MUM/2010

• Counselvise Citation: 475519914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K KUBAL
• Assessee Lawyers: ASHOK J PATIL
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4755/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. PMT MACHINES LIMITED DCIT, CIRCLE 2(2) 20-B, KHATAU BUILDING AAYAKAR BHAVAN, M.K. ROAD 1ST FLOOR, ALKESH DINESH MODI VS. MUMBAI 400020 MARG, MUMBAI 400023 PAN - AAACP 4680 L APPELLANT RESPONDENT APPELLANT BY: SHRI ASHOK J. PATIL RESPONDENT BY: SHRI M.K. KUBAL DATE OF HEARING: 02.08.2011 DATE OF PRONOUNCEMENT: 02.08.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- V, MUMBAI DATED 05.04.2010 CONFIRMING THE DISALLOWANCE OF ` 66,14,958/- UNDER SECTION 14A OF THE I.T. ACT MADE BY THE A.O. 2. ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN VARIOUS TYPES OF TURNING, MILLING, GRINDING MACHINE S FILED RETURN OF INCOME ON 30.11.2006 DECLARING A LOSS OF ` 2,87,76,186/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) DETERMINING THE TOTAL LOSS AT ` 2,18,87,539/- DISALLOWING AN AMOUNT ` 66,14,958/- UNDER SECTION 14A READ WITH RULE 8D AND ` 2,73,689/- BEING BELATED PAYMENT OF PF. ACCORDING TO THE A.O., ASSES SEE HAD MADE AN INVESTMENT OF ` 16.31 CRORES IN SHARES AND MUTUAL FUNDS, THE INCOME OF WHICH WAS EXEMPT. THEREFORE INVOKING THE PROVISIONS OF SECTION 14A HE MADE A DISALLOWANCE OF ` 66,14,958/-. ASSESSEE CONTESTED THE ISSUE OF DISALL OWANCE UNDER SECTION 14A BEFORE THE CIT(A), WHO CONFIRMED THE DISALLOWANCE HOLDING THAT SINCE THE SAID INVESTMENT HAD NO DIRE CT NEXUS WITH ANY PARTICULAR EXPENDITURE, THE AO HAS WORKED OUT THE I NDIRECT EXPENSES AND ITA NO. 4755/MUM/2010 M/S. PMT MACHINES LIMITED 2 OTHER EXPENSES AS PER RULE 8D IN WORKING OUT THE DI SALLOWANCE STRICTLY AS PER FORMULA LAID DOWN. AGGRIEVED BY THE ABOVE DECI SION ASSESSEE IN APPEAL. 3. WE HAVE HEARD THE RIVAL ARGUMENTS, CONSIDERED THE I SSUE AND PERUSED THE RECORD. SINCE THE PROVISIONS OF RULE 8D WHICH W AS FOLLOWED BY THE A.O. AND THE LEARNED CIT(A) ARE NOT APPLICABLE TO THE AS SESSMENT YEAR UNDER CONSIDERATION AS HAS BEEN CONSIDERED AND DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF AND GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT (SUPRA), THE A.O. HAS TO CONSIDER THE DISALLOWANCE OF A RE ASONABLE AMOUNT. THERE IS NO DISCUSSION WHETHER THE ASSESSEE INVESTED ANY BOR ROWED FUNDS IN THE SAID SHARES AND MUTUAL FUNDS. THERE IS ALSO NO DISCUSSIO N ABOUT PAYMENT OF ANY INTEREST ON BORROWED FUNDS IF ANY DIVERTED FOR INVE STMENT. THERE IS NO INCOME CLAIMED EXEMPT IN THE YEAR UNDER CONSIDERATI ON. THE AO SIMPLY INVOKED RULE 8D AND DISALLOWED WITHOUT EXAMINING AN Y OF THE ISSUES OR EVEN CLAIMS OF EXPENDITURES. FOR THESE REASONS, THE DISA LLOWANCE MADE BY THE A.O. IS SET ASIDE AND THE MATTER IS RESTORED BACK T O THE FILE OF THE A.O. WITH A DIRECTION TO CONSIDER IT AFRESH KEEPING IN MIND THE PRINCIPLES ESTABLISHED BY THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT OR ANY OTHER JUDGMENT OF THE SUPERIOR JUDICIAL FORUM ON THE ISSUE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 2 ND AUGUST 2011 COPY TO: THE APPELLANT 1. THE RESPONDENT 2. THE CIT(A) V, MUMBAI 3. THE CIT II, MUMBAI CITY 4. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.