ACIT 5(3), MUMBAI V. STOREWELL CRDITS & CAPITAL P LTD, MUMBAI

ITA 4995/MUM/2011

• Counselvise Citation: 499519914 RSA 2011
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATBIV SINGH
• Assessee Lawyers: S V JOSHI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE SHIRI RAJENDRA SINGH, A.M. ITA NO. : 4995/MUM/2011 ASSESSMENT YEAR : 2007-08 ACIT, CIR.5(3), R.NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI VS. M/S. STOREWELL CREDITS & CAPITAL PVT. LTD. KEJRIWAL HOUSE, 7, N. GAMADIA ROAD, MUMBAI-400 026. PAN NO: AADCS 9571 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATBIV SINGH RESPONDENT BY : SHRI S. V. JOSHI DATE OF HEARING : 01.12.2011 DATE OF PRONOUNCEMENT : 01.12.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24.03.2011 OF THE LD. CIT(A)-9 FOR THE ASSESSMENT Y EAR 2007-08. THE ONLY DISPUTE RAISED IS REGARDING DISALLOWANCE OF EX PENSES U/S.14A OF THE I.T. ACT. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE RELEVANT YEAR HAD RECEIVED INCOME FROM DIVIDEND AND LONG TERM CAPITAL GAIN FROM SALE OF SHARES, WHICH WAS EXEMPTED FROM TAX. THE AO, THEREF ORE, MADE DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME AMOUNTING TO `. 3,86,282/- AS PER RULE 8D. ITA NO : 4995/MUM/2011 M/S. STOREWELL CREDITS & CAPITAL PVT. LTD. 2 3. IN APPEAL, CIT(A) OBSERVED THAT IN VIEW OF THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF DAGA CAPIT AL MANAGEMENT PVT. LTD. (26 SOT 609), THE PROVISIONS OF SECTION 14A WI LL ALSO APPLY TO DIVIDEND INCOME EARNED IN RESPECT OF SHARES HELD AT STOCK-IN-TRADE. THE TRIBUNAL ALSO OBSERVED THAT IN VIEW OF THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOMBAY IN CASE OF GODREJ & BOYCE MANUFACTU RING PVT. LTD. (328 ITR 81), RULE 8D WILL APPLY ONLY FROM THE ASSESSMEN T YEAR 2008-09 AND IN RESPECT OF PRIOR YEARS, THE DISALLOWANCE HAD TO BE MADE ON REASONABLE BASIS. CIT(A), THEREFORE, DIRECTED THE AO TO EXAMIN E THE ISSUE IN THE LIGHT OF THE ABOVE JUDGMENTS AND WORK OUT THE DEDUCTION A CCORDINGLY. AGGRIEVED BY THE SAID DECISION, THE REVENUE IS IN A PPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND CONSIDERED THE MATTER CAREFULLY. THE ONLY GRIEVANCE OF THE REV ENUE IS THAT UNDER THE PROVISIONS OF SECTION 251, CIT(A) WAS NOT EMPOWERED TO SET ASIDE ANY ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION . BOTH THE PARTIES HAD NO DISPUTE OVER THIS ISSUE. THERE IS ALSO NO DISPUT E THAT IN VIEW OF THE JUDGEMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE O F GODREJ & BOYCE MANUFACTURING PVT. LTD. (SUPRA) RULE 8D CANNOT BE A PPLIED FOR THE ASSESSMENT YEAR 2007-08. IN VIEW OF THE SAID JUDGE MENT, THE DISALLOWANCE U/S.14A IN RESPECT OF PRIOR YEARS HAS TO BE MADE ON A REASONABLE BASIS AFTER ALLOWING AN OPPORTUNITY OF H EARING TO THE ASSESSEE. THERE IS ALSO NO DISPUTE THAT IN VIEW OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN CASE OF DAGA CAPITAL MANAG EMENT PVT. LTD. (SUPRA), SECTION 14A WOULD ALSO APPLY IN RESPECT OF DIVIDEND INCOME EARNED FROM TRADING SHARES. THEREFORE, THERE IS NO ERROR IN THE ORDER OF CIT(A) IN SO FAR AS THE MERIT OF CASE IS CONCERNED. ONLY TECHNICAL OBJECTIONS HAS BEEN RAISED THAT CIT(A) HAS NO POWER TO RESTORE THE ISSUE TO THE FILE OF THE AO. I, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND ITA NO : 4995/MUM/2011 M/S. STOREWELL CREDITS & CAPITAL PVT. LTD. 3 RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR P ASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF THE OBS ERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE AS SESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON TO DAY I.E. 1 ST DECEMBER, 2011. SD/ - ( RAJENDRA SINGH ) ACCOUNTANT MEMBER MUMBAI, DT: 01.12.2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, SMC - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI