SANGAM BUSINESS CREDIT LTD, MUMBAI V. ITO 8(3)(1), MUMBAI

ITA 5102/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4879 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Keywords: Opportunity of being heard; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI. N.V. VASUDEVAN (J.M.) AND SHRI. R.K. P ANDA (A.M.) ITA NO.5102/MUM/2009 ASSESSMENT YEAR : 2006-2007 SANGAM BUSINESS CREDIT LTD. B-306-309, DYNASTY BUSINESS PARK, OPP. SANGAM CINERMA, A.K. RD., ANDHERI (E), MUMBAI 400 069. PAN : AAACS8302E VS. I.T.O. 8(3)(1) AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIPUL JOSHI RESPONDENT BY : SHRI SHRAVAN KUMAR O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31.07.2009 OF THE CIT(A)-XXIX, MUMBAI RELATING TO ASSESSMENT YEAR 2006- 2007. 2. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALL ENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE OF ` .4,86,856/- MADE BY THE ASSESSING OFFICER U/S.14A READ WITH RULE 8D. 3 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT. THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT, THE ASSESSEE HAS CLAIMED DIVIDEND INCOME OF ` .55,16,101/-AS EXEMPT U/S.10(34) OF THE ACT AND PRO FIT ON SALE OF INVESTMENT OF ` .1,38,74,313/- AS EXEMPT U/S.10(38) OF THE ACT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THE EXPENSES PERTAINING TO EARN THE EXEMPT INCOME SHOULD NOT BE DISALLOWED U/S.14A OF THE I.T. ACT. NOT BEING SATISFIED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE THE ASSESSING OFFICER CALCULATED SUCH DISALLOWANCE U/S.14A AT ` .6,79,742/-. ITA NO.5102/MUM/2009 ASSESSMENT YEAR : 2006-2007 2 4. BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE D ISALLOWANCE OF INTEREST COMPONENT OF ` .4,86,856/-OUT OF ` .6,79,242/- DISALLOWED BY THE ASSESSING OFFICER. HOWEVER, THE CIT(A) FOLLOWING THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DAGA CAPITAL MA NAGEMENT P. LTD., REPORTED IN 117 ITD 169 CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGGRIEVED BY SUCH ORDER OF THE CIT(A), T HE ASSESSEE IS IN APPEAL BEFORE US. 5. AFTER HEARING BOTH THE SIDES, WE FIND THE JURISD ICTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT REP ORTED IN 43 DTR (BOM) 177 HAS HELD THAT THE PROVISIONS OF RULE 8D OF THE I.T. RULES WHICH HAVE BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 SHALL APPLY W.E.F. ASSESSMENT YEAR 2008-09. IT HAS FURTHER BEEN HELD IN THE SAID ORDE R AS UNDER: (VI)EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN R.8D WA S NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB-S.(1) OF S.14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FAC TS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. 6. ADMITTEDLY THE DECISION OF THE JURISDICTIONAL HI GH COURT WAS NOT AVAILABLE BEFORE THE CIT(A) OR ASSESSING OFFICER. WE THEREFORE, DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE IN THE LIGHT OF THE D ECISION OF THE JURISDICTIONAL HIGH COURT CITED ABOVE AND IN ACCORDANCE WITH LAW A FTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE H OLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS A CCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THIS 22 ND DAY OF SEPTEMBER, 2010. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 22.09.2010 ITA NO.5102/MUM/2009 ASSESSMENT YEAR : 2006-2007 3 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI