IDFC ASSET MANAGEMENT COMPANY LTD, MUMBAI V. ADDL CIT 2(3), MUMBAI

ITA 5017/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54864 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Keywords: Opportunity of being heard; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI P.M. JAGTAP (A.M.) AND SHRI VIJAY PAL R AO (J.M.) ITA NO.5017/MUM/2010 ASSESSMENT YEAR : 2005-06 ITA NO.5032/MUM/2010 ASSESSMENT YEAR : 2006-07 IDFC ASSET MANAGEMENT COMPANY LTD. ONE INDIA BULLS CENTRE, 841, JUPITER MILLS, MUMBAI 400 013. VS. ADDL. C.I.T. -2(3) AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GIRISH DAVE (AR) RESPONDENT BY : SHRI SANJIV DUTT (DR) O R D E R PER P.M. JAGTAP, A.M. THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT (A)-VI, M UMBAI DATED 06.04.2010 AND 09.04.2010 FOR A.Y. 2005-06 AND 2006-07 RESPECT IVELY. SINCE COMMON ISSUE IS INVOLVED IN THESE TWO APPEALS, THE SAME HA VE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE COMPOSITE ORDER. 2. THE SOLITARY COMMON ISSUE ARISING OUT OF THESE A PPEALS RELATES TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) U/S.14A READ WITH RULE 8D OF THE INCOME TAX RULE, 1962. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANAGING INVESTMENT, FUNDS, ASSETS AND RENDERING INVESTMENT MANAGEMENT AND ADVISORY SERVICES. IN THE RETURNS OF INCOME FILED FOR THE YEARS UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD CLAIMED EXEMPTION IN RESPECT OF INCOME EARNED IN THE FORM OF DIVIDEND ON SHARES AND LONG TERM ITA NO.5017/MUM/2010 ITA NO.5032/MUM/2010 2 CAPITAL GAIN. NO DISALLOWANCE ON ACCOUNT OF EXPEND ITURE INCURRED IN RELATION OF THE SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS REQUIRED BY THE PROVISION OF SECTION 14A. IN THE ASSESSMENT S COMPLETED U/S. 143(3), THE AO WORKED OUT SUCH EXPENSES INCURRED BY THE ASS ESSEE IN RELATION TO EXEMPT INCOME BY APPLYING RULE 8D OF INCOME TAX RUL E, 1962 AT RS.22,28,456/- AND RS.22,32,068/- FOR A.Y.2005-06 A ND 2006-07 RESPECTIVELY AND DISALLOWANCE OF THE SAID AMOUNTS W AS MADE BY HIM U/S.14A. ON APPEAL, THE LD CIT(A) CONFIRMED THE SA ID DISALLOWANCE MADE BY THE AO U/S.14A READ WITH RULE 8D FOR BOTH THE YEARS UNDER CONSIDERATION RELYING ON THE DECISION OF SPECIAL BENCH OF I.T.A.T . IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 WHEREIN IT WAS HELD THAT RULE 8D OF INCOME TAX RULE, 1962 HAS A RETROSPECTIVE OPERAT ION. AGGRIEVED BY THE ORDERS OF THE LD CIT(A), THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LD REPRESENTATIVE OF BOTH THE SIDES, THE ISSUE INVOLVED IN THESE APPEALS NOW STAN DS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ BOYCE LTD. (2010) 234 CTR (BOM) 1, WHEREIN IT IS HELD THAT RUL E 8D OF INCOME TAX RULE, 1962 IS APPLICABLE ONLY FROM A.Y.08-09. AS FURTHER HELD BY THE HONBLE BOMBAY HIGH COURT, DISALLOWANCE U/S.14A FOR THE YEA RS PRIOR TO ASSESSMENT YEAR 08-09 HAS TO BE MADE BY ADOPTING SOME REASONAB LE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE IMPUGNED ORDERS OF THE LD C IT(A) ON THE ISSUE UNDER CONSIDERATION AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE THE DISALLOWANCE OF THE EXPENSES WHICH HA S TO BE MADE U/S.14A BY APPLYING SOME REASONABLE METHOD AFTER GIVING THE ASSESSEE A PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. ITA NO.5017/MUM/2010 ITA NO.5032/MUM/2010 3 4. IN THE RESULT, APPEALS OF THE ASSESSEE ARE TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2011. SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI, DATED 12.08.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI