COSMO SYNTHEITCS (INDIA) LTD (PRESENTLY VISHAL FURNISHINGS LTD), MUMBAI V. ASST CIT CIR 6(2), MUMBAI

ITA 5260/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75324 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.5260/MUM/2012 5260/MUM/2012 5260/MUM/2012 5260/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2007-08) M/S COSMO SYNTHETICS (INDIA) LIMITED (PRESENTLY VISHAL FURNISHINGS LTD.), 307, 3 RD FLOOR, TRADE WORLD-B WING, TRADE WORLD, KAMALA CITY, S. B. MARG, LOWER PAREL, MUMBAI-400013 % % % % / VS. ASSISTANT COMMISSIONER OF INCOME TAX-CIRCLE 6(2), MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AAACR2138K ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI SANJIV M. SHAH # # # # . / . / . / . / / REVENUE BY : SHRI RAVI PRAKASH % % % % . .. . -! -! -! -! / DATE OF HEARING : 16 TH JANUARY 2014 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 22 ND JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 21.5.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE ONLY GROUND IN THIS APPEAL AS UNDER: 1. THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT ` 10,85,468/- BEING 5% OF DIVIDEND INCOME OF ` 2,17,0 9,350/- EARNED BY THE APPELLANT BE TREATED AS EXPENDITURE I NCURRED FOR EARNING EXEMPT INCOME ON ADHOC BASIS U/S 14A AND TH E REASONS ASSIGNED BY HER ARE TOTALLY WRONG AND ARE CONTRARY TO THE FACTS AND PROVISIONS OF INCOME TAX ACT, 1961 AND RULES MA DE THERE UNDER: ITA NO.5260/M/2012 COSMO SYNTHETICS (INDIA) LIMITED 2 3. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF ` 2 .17 CRORES WHICH WAS CLAIMED AS EXEMPT. THE A.O NOTED THAT THE ASSES SEE HAS NOT SHOWN ANY EXPENSES AS HAVING BEING INCURRED FOR EARNING T HE SAID EXEMPT INCOME. THE A.O ACCORDINGLY DISALLOWED THE ADMINIST RATIVE EXPENSES OF ` 10,55,812/- BY APPLYING RULE 8D OF THE INCOME TAX R ULES. ON APPEAL, THOUGH THE CIT(A) HAS HELD THAT RULE 8D IS NOT APPL ICABLE FOR THE YEAR UNDER CONSIDERATION HOWEVER, THE DISALLOWANCE WAS H ELD AS REASONABLE BEING 5% OF THE DIVIDEND INCOME. HENCE, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE ON THIS ACCOUNT. 4. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE 5% OF THE DIVIDEND INCOME IS NOT A REASONABLE ESTIMATE AS HELD BY THIS TRIBUNAL IN A NUMBER OF DECISIONS WHERE THE DISALLOWANCE AT 1% TO 2% OF THE DIVIDEND INCOME IS CONSIDERED AS REASONABLE. ON THE OTHER HAND, THE LD. D.R HAS RELIED UPON THE IMPUGNED ORDER OF THE CIT(A ). 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS CAREFUL PERUSAL OF RECORD WE NOTE THAT THE DISALLOWANCE MADE BY THE A. O UNDER RULE 8D IS NOT SUSTAINABLE FOR THE YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS DCIT 328 ITR 81. WE FURTHER NOTE THAT THERE ARE SERIES OF DECISIONS OF THIS TRIBUNAL WHEREIN IT HAS BEEN HELD THAT 1-2% OF THE DIVIDEND INCOME IS A REASONABLE BASIS FOR DISALLOWANCE OF ADMINISTRATI VE EXPENSES U/S 14A. ACCORDINGLY, WE ESTIMATE THE EXPENDITURE AT 2.5% OF THE DIVIDEND INCOME TO BE DISALLOWED U/S 14A. THE A.O IS DIRECTED ACCOR DINGLY. ITA NO.5260/M/2012 COSMO SYNTHETICS (INDIA) LIMITED 3 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI