Gebr Pfeiffer (India) Pvt. Ltd., Noida V. DCIT, New Delhi

ITA 4989/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6609 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI DELHI DELHI DELHI, BENCH , BENCH , BENCH , BENCH C CC C, , , , NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI C. L. SETHI, JUDICIAL MEMBER AND SHRI K. D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4989 /DEL/2010 (ASSESSMENT YEAR 2006-07) GEBR PFEIFFER (INDIA) PVT. LTD., VS. DCIT, CIRCLE 12(1), PLOT NO.A-27A, SECTOR 16, NEW DELHI. NOIDA-201302 (U.P.) (APPELLANT) (RESPONDENT) PAN AABCG3002E APPELLANT BY: SHRI SALIL AGARWAL, ADV. RESPONDENT BY: SMT. MONA MOHANTY, SR. DR ORDER ORDER ORDER ORDER PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: 1. THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2006-07 ARISES OUT OF THE ORDER OF LD. CIT(A) XV, NEW DELHI . DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO.5 OF APPEAL RELATING TO DISALLOWANCE OF D EPRECIATION ON CARS. HENCE, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 2. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DISA LLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT. THE RELE VANT GROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 2) THAT THE LD. CIT(A) HAS GROSSLY ERRED NOT IN AP PRECIATING THAT THE PROVISIONS OF RULE 8D ARE PERSPECTIVE AND NOT APPLICABLE TO ASSESSMENT YEAR 2006-07 AND ANY DISAL LOWANCE OF THE BASIS OF THE SAME IS BAD IN LAW. 3) THAT THE LD. CIT(A) HAS GROSSLY ERRED NOT IN APP RECIATING THAT BEFORE NAY DISALLOWANCE CAN BE MADE U/S 14A TH ERE SHOULD BE A NEXUS BETWEEN THE EXPENSES DEBITED AND THE EXEMPT INCOME. I.T.A.NO. 4989/DEL/2010 2 4) THAT THE LD. CIT(A) HAS GROSSLY ERRED IN NOT APP RECIATING THAT THE ASSESSEE HAD NOT INCURRED NAY EXPENSES FOR EARNING THE EXEMPT INCOME WHICH WAS PURELY FROM DIVIDEND IN COME AND NO EXPENSES BEEN INCURRED HENCE THERE WAS NO OC CASION FOR DISALLOWANCE OF EXPENSES. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THATS THE ASSESSEE IN ITS RETURN OF INCOME HAS CLAIMED DIVIDEND OF INCOME OF ` 8,13,820/- AS EXEMPT. THE ASSESSING OFFICER APPLIED RULE 8D O F I T RULE 1962 AND DETERMINED THE DISALLOWANCE AT ` 1,51,045/-. O N APPEAL, CIT(A) RELIANCE WAS PLACED ON THE DECISION OF HON'BLE BOMB AY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING LTD. 43 DT R 177, WHEREIN IT HAS HELD THAT THE PROVISIONS OF RULE 8D WHICH HA S BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 ARE NOT RETROSPECTIVE IN NATURE AND SH ALL APPLY W.E.F. THE ASSESSMENT YEAR 2008-09. IT HAS A LSO BEEN HELD THAT THE ASSESSING OFFICER HAD TO ENFORCE THE PROVI SIONS OF SUB- SECTION (1) OF SECTION 14A AND, FOR THAT PURPOSE, T HE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE, WHICH HAD BEEN INCURRED IN RELATION TO THE INCOME WHICH DID NOT FO RM PART OF TOTAL INCOME UNDER THE ACT BY ADOPTING A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL FACTS AND CIRCUMSTANCES. BASE D ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA). 4. LD. CIT(A) HAS OBSERVED THAT THE PRINCIPLE UNDER LING SECTION 14A(1) IS THAT NO DEDUCTION CAN BE CLAIMED IN RESPE CTS OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. SINCE RULE 8D H AS BEEN HELD TO BE PROSPECTIVE IN NATURE APPLICABLE FOR THE ASSESSM ENT YEAR 2008- 09, THE DISALLOWANCE COULD NOT BE MADE UNDER RULE 8 D OF THE ACT IN ASSESSMENT YEAR 2006-07. LD. CIT(A) CONSIDERED VAR IOUS DECISION OF ITAT AND CAME TO THE CONCLUSION THAT QUANTIFICATION OF EXPENSES RELATING TO DIVIDEND INCOME HAS NOT BEEN MADE BY TH E ASSESSEE. THE ASSESSING OFFICER HAS BEEN ABLE TO SHOW WITH RE FERENCE TO THE I.T.A.NO. 4989/DEL/2010 3 ACCOUNT OF THE ASSESSEE THAT THE EXPENDITURE WAS FA CTUALLY INCURRED TOWARD EARNING OF DIVIDEND INCOME AND THAT THERE WA S DIRECT RELATIONSHIP BETWEEN PART OF EXPENDITURE DEBITED TO THE ACCOUNTS AND THE EXEMPT INCOME. LD. CIT(A) IN VIEW OF THESE FACTS, UPHELD THE DISALLOWANCE. 5. WE HAVE HARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. (SUPRA) HAS HELD T HAT RULE 8D WHICH HAS BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 ARE NOT RETROSPECTIVE IN NATURE AND SHALL APPLY W.E.F. THE ASSESSMENT YEA R 2008-09. HOWEVER, THE EXPENDITURE RELATABLE TO EXEMPT INCOME CANNOT BE ALLOWED AS DEDUCTION. HONBLE BOMBAY HIGH COURT HA S ALSO HELD THAT THE ASSESSING OFFICER IS DUTY BOUND TO DETERMI NE THE EXPENDITURE RELATABLE TO EXEMPT INCOME ADOPTING A R EASONABLE BASIS. SINCE THE ASSESSING OFFICER HAD NOT EXAMINE D THE ISSUE IN THE LIGHT OF DECISION OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) AS THE SAME WAS NOT AVAILABLE WHEN THE ASSESSING OFFICER PASSED THE ORD ER. WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H THE DIRECTION TO ESTIMATE EXPENDITURE RELATABLE TO EXEMPT INCOME. T HE ASSESSING OFFICER WILL PROVIDE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE CLOSE OF HEARING ON 26 TH APRIL 2011. SD./- SD./- (C. L. SETHI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:26 TH APR., 2011 SP. I.T.A.NO. 4989/DEL/2010 4 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI