JAGUAR SERVICES P.LTD, MUMBAI V. ASST CIT RG 10(2), MUMBAI

ITA 4923/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78733 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 09-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Assessee Lawyers: FALE E H BILIMORIA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE S/SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SANJAY GARG, JUDICIAL ME MBER . , , ./I.T.A. NO.4923/MUM/2012 ( / ASSESSMENT YEAR : 2009-10) JAGUAR SERVICES PVT LTD., KALYANIWALAL & MISTRY ARMY AND NAVY BUILDING, 148, MAHATMA GANDHI ROAD, MUMBAI-400001 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX, RANGE 10(2), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. ( ! / APPELLANT) .. ( '#! / RESPONDENT) ./ ./PAN/GIR NO. : AAACJ1950H ! /APPELLANT BY : SHRI FALEE H BILIMORIA '#! & /RESPONDENT BY : SHRI D K SINHA & * / DATE OF HEARING : 9.4.2014 & * /DATE OF PRONOUNCEMENT :9.4.2014 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 10.4.2012. 1. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF INTEREST EXPENDITURE MADE UNDER SECTION 14A OF THE ACT AGGRE GATING TO RS.3009/- TOWARDS EARNING OF DIVIDEND INCOME UNDER CLAUSE (II ) OF RULE 8D. 2. THE CIT(A) ERRED IN CONFIRMING HE DISALLOWANCE O F ADMINISTRATIVE EXPENDITURE MADE UNDER SECTION 14A OF THE ACT AGGRE GATING TO RS.2,17,643/- TOWARDS THE EARNING OF DIVIDEND INCOME UNDER CLAUSE (III) OF RULE 8D; 3. WITHOUT PREJUDICE TO APPELLANTS CONTENTION THAT NO EXPENDITURE IS ALLOCABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME AND IN ANY VIEW OF THE MATTER THE APPELLANT SUBMITS THAT DISALLOWANCE EST IMATED AT RS.2,17,643/- IS ARBITRARY AND GROSSLY EXCESSIVE AND THE SAME REQUIR ES TO BE REDUCED SUBSTANTIALLY; I.T.A. NO.4923/MUM/2012 2 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING TO RS.4,935/- TO THE TOTAL INCOME WHICH R EPRESENTS THE DIFFERENCE IN THE AIR DESPITE THE FACT THAT SUCH DIFFERENCE WAS A PPROPRIATELY EXPLAINED 2. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS S TATED AT BAR THAT HE DOES NOT PRESS GROUNDS NOS. 1 & 4 OF THE APPEAL DUE TO SMALL NESS OF THE AMOUNT INVOLVED. THE GROUNDS NOS. 1 & 4 ARE THEREFORE DISMISSED BEING NO T PRESSED. 3. THE SUBJECTIVE ISSUE RAISED BY THE ASSESSEE VI DE GROUNDS NOS.2 &3 IS RELATING THE CONFIRMATION OF DISALLOWANCE OF RS.2,17,643/-- U/S 14A OF THE INCOME TAX ACT READ WITH CLAUSE (III) OF RULE 8D(2)OF THE I.T. RULES 4. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO A S THE AO) DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED RS.14,80,967/-- BY WAY OF DIVIDEND AND CLAIMED THE SAME AS EXEMPT INCOME. THE ASSESSEE WORKED OUT THE DISALLOWANCE AS PER HIS OWN COMPUTATION/CALCULATION S AND OFFERED A SUM OF RS.46,363/- TOWARDS ADMINISTRATIVE EXPENSES. HOWEVER THE AO WRO NGLY OBSERVED THAT THE ASSESSEE HAD CLAIMED THAT IT HAD NOT INCURRED ANY EXPENDITUR E FOR EARNING OF EXEMPT INCOME. THE AO THEREFORE MADE THE DISALLOWANCE U/S.14A OF THE I .T. ACT APPLYING RULE 8 D OF THE I.T. RULES. 5. IN FIRST APPEAL, THE LD. CIT(A) OBSERVED THAT TH E ASSESSEES FUNDS WERE MIXED FUNDS AND THAT THE RULE 8D WAS MANDATORILY APPLICA BLE. HE THEREFORE HELD THAT THE PROVISIONS OF SECTION 14A R.W.R. 8D HAD RIGHTLY BEE N INVOKED BY THE AO AND CONFIRMED THE DISALLOWANCE SO MADE BY THE AO. AGGRIEVED AGAIN ST THE ORDER OF THE CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. RE PRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 , THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A(2) IS NOT ARBITRARY OR UNREASONABLE BUT CAN BE APPLIED ONLY I F THE ASSESSEE'S METHOD IS NOT SATISFACTORY. IT HAS BEEN FURTHER HELD THAT RULE 8 D IS NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008-09. IT MAY BE FURTHER OBSERVED THAT UNDER SECTION 14A OF THE INCOME TAX ACT, RESORT CAN BE MADE TO RULE 8D OF THE INCOME TAX RUL ES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, IF, THE A O IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUC H EXPENDITURE. HOWEVER, A PERUSAL I.T.A. NO.4923/MUM/2012 3 OF THE ASSESSMENT ORDER REVEALS THAT THE AO WITHOUT RECORDING ANY DISSATISFACTION WITH REGARD TO THE COMPUTATION/WORKING GIVEN BY THE ASSE SSEE RELATING TO THE EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14A OF THE INC OME TAX ACT. THE LD. CIT(A) ALSO WRONGLY HELD THAT THE RULE 8D WAS MANDATORILY APPLI CABLE WHILE CONFIRMING THE DISALLOWANCE. 7. SO KEEPING IN VIEW OF THE OVERALL FACTS AND CI RCUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECT ION THAT THE AO WILL EXAMINE THE COMPUTATION/CALCULATION MADE IN THIS REGARD BY THE ASSESSEE. THE AO WILL BE AT LIBERTY TO CALL FOR ANY RECORD/EVIDENCES OR STATEMENT ETC. FRO M THE ASSESSEE AS MAY BE REQUIRED BY HIM FOR DECIDING THE ISSUE UNDER CONSIDERATION. AFT ER GOING THROUGH THE DETAILS PROVIDED BY THE ASSESSEE, IF THE AO WILL BE SATISFIED WITH T HE OBJECTION/CALCULATION MADE BY THE ASSESSEE THEN HE WILL ASSESS THE INCOME ACCORDINGLY . HOWEVER, IF THE AO DOES NOT AGREE WITH THE COMPUTATION MADE BY THE ASSESSEE AND IN TH AT EVENT, HE WILL HAVE TO RECORD HIS DISSATISFACTION WITH REASONING FOR THE SAME BY WAY OF A SPEAKING ORDER, THEN HE WILL BE AT LIBERTY TO RESORT TO THE PROVISIONS OF RULE 8D(2 ) (III). NEEDLESS TO SAY, THE ASSESSEE WILL CO-OPERATE AND PROMPTLY SUPPLY THE NECESSARY DETAIL S ETC. TO THE AO FOR DECIDING THE ISSUE UNDER CONSIDERATION. IT IS MADE CLEAR THAT OU R ABOVE DIRECTIONS ARE WITH RESPECT TO THE ISSUE OF DISALLOWANCE U/S 14A R.W.R. 8D(2) (III ) ONLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH APRIL, 2 014 & / 0 9TH APRIL, 2014 & SD SD ( D. KARUNAKARA RAO/ . ) ( SANJAY GARG/ ) JUDICIAL MEMBER / ACCOUNTANT MEMBER/ MUMBAI; 0 DATED: 9/04/2014 . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- I.T.A. NO.4923/MUM/2012 4 4. 4 / CIT 5. 5 '7 , * 7 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) * 7 , /ITAT, MUMBAI