RAYMOND APPAREL LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 5233/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56100 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 29-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R BAIWAR
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI B. RAMAKOTAIAH (AM) I.T.A. NO.5233/MUM/2010 (A.Y. 2007-08) M/S. RAYMOND APPAREL LTD., NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE, MUMBAI-400 001. PAN:AAACJ2732K VS. ASSTT. COMMR. OF INCOME-TAX-2(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI HARSH SHAH. RESPONDENT BY SHRI A .R. BAIWAR. DATE OF HEARING 29 - 11 - 2011 DATE OF PRONOUNCEMENT 0 9 - 12 - 2011 O R D E R PER D.K. AGARWAL, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 20-4-2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSME NT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GAR MENTS AND APPARELS, FILED RETURN DECLARING TOTAL INCOME AT RS.18,62,09,175/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE HAS EARNED DIVIDEND INCOME OF RS.33,350/- AND HAS CLAIMED THE SAME AS E XEMPT INCOME. ON BEING ASKED AS TO WHY PROPORTIONATE EXPENDITURE SHOULD NO T BE DISALLOWED U/S.14A OF ITA NO.5233/M/2010 RAYMOND APPAREL LTD. 2 THE I.T. ACT, 1961 (THE ACT), READ WITH RULE 8D OF THE I.T. RULES, THE ASSESSEE, INTER ALIA, SUBMITTED THAT IT HAS NOT MADE ANY BORR OWING FOR INVESTMENT IN SHARES OF COMPANY FOR EARNING TAX FREE INCOME AND HENCE SE C. 14A OF THE ACT IS NOT APPLICABLE. HOWEVER, THE AO DID NOT ACCEPT THE ASSE SSEES EXPLANATION. THE AO, IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ITO VS. DAGA CAPITAL & MANAGEMENT CO. LTD. SINCE REPORTED IN 117 ITD 169 (SB) (MUM.), WORKED OUT THE DISALLOWANCE U/S.14A AT RS.1,03,76,0 00/- AS PER WORKING GIVEN AT PAGE 3 OF THE ASSESSMENT ORDER AND ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A), WHILE AGREEING WITH THE VIEWS OF THE AO, CONFIRMED THE DISALLOWANCE MADE BY THE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTEN ANCE OF DISALLOWANCE OF RS. 1,03,76,000/- U/S.14A AND LEVY OF INTEREST U/S.234B OF THE ACT. 4. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AG REED THAT THE ISSUE OF DISALLOWANCE OF RS.1,03,76,000/- U/S.14A STANDS COV ERED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYC E MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM), THEREFORE, BOTH THE ISSUES MAY BE SET ASIDE TO THE FILE OF AO. 5. HAVING CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND MERIT IN THE PLEA OF THE PARTIES THAT THE ISSUE STANDS COVERED BY THE RECENT JUDGMEN T OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) , WHEREIN THEIR LORDSHIPS, AFTER CONSIDERING THE DECISION OF THE TRIBUNAL IN D AGA CAPITAL MANAGEMENT PVT. LTD. (117 ITD 169) (MUM) (SB), WHILE HOLDING THAT T HE PROVISIONS OF SUB-SECTIONS (2) AND (3) OF SEC. 14A OF THE ACT ARE CONSTITUTION ALLY VALID, HAVE HELD VIDE PLACITUM 88(VI) APPEARING AT PAGE 138 OF THE ITR AS UNDER : ITA NO.5233/M/2010 RAYMOND APPAREL LTD. 3 (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN R ULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO EN FORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR T HAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DET ERMINE 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 REASONA BLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AN D CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE R ECORD. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT, WE SET S IDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON BOTH THE ISSUES AND SEND BAC K THE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF TH E DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE A ND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWE D FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE ASSESSEES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 09TH DAY OF DECEMBER,2011. SD/- SD/- (B. RAMAKOTAIAH) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 09TH DECEMBER , 2011. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-6,MUMBAI. 4 CIT-2,MUMBAI. 5.DR,J BENCH,MUMBAI. ITA NO.5233/M/2010 RAYMOND APPAREL LTD. 4 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NO.5233/M/2010 RAYMOND APPAREL LTD. 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 29-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 30-11-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER