ADDL CIT 10(1), MUMBAI V. AKER POWERGAS P.LTD ( FORMERLY AKER KVAERNER POWERGAS P LTD), MUMBAI

ITA 5278/MUM/2011

• Counselvise Citation: 527819914 RSA 2011
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 11-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: ASHISH GOGRI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI B.R. MITTAL, J.M. AND SHRI RAJENDRA SI NGH, A.M. ITA NO.5278/MUM/2011 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX -10(1) 455 AAYAKAR BHAVAN 4 TH FLOOR, M.K. MARG MUMBAI-400 020. M/S. AKER POWERGAS PRIVATE LIMITED (FORMERLY AKER KVAERNER POWERGAS PVT. LTD.) POWERGAS HOUSE, 1-THINK TECHNO CAMPUS, TALUKA KURLA, VILLAGE KANJUR KANJURMARG(E) MUMBAI-400 042. PAN NO. AAACD 1981 E (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI D.S. SUNDER SINGH RESPONDENT BY : SHRI ASHISH GOGRI DATE OF HEARING : 24.5.2012 DATE OF PRONOUNCEMENT : 1.6.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 5.4.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. TH E ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DISALLOWANCE O F EXPENSES UNDER SECTION 14A RELATING TO THE EXEMPT INCOME. ITA NO.5278/M/11 A.Y.6-07 2 2. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT TH E ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.2,18,53,688/- F ROM SHARES. AO THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS T O WHY PART OF THE EXPENSES SHOULD NOT BE DISALLOWED UNDER SECTION 14A O F THE INCOME TAX ACT,1961 (THE ACT). THE ASSESSEE SUBMITTED TH AT IT HAD NOT INCURRED ANY SPECIFIC EXPENDITURE FOR EARNING DIVI DEND INCOME AND THEREFORE, NO PART OF THE EXPENSES SHOULD BE DISALLOWE D. THE AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OB SERVED BY HIM THAT ALL EXPENSES WHETHER DIRECT OR INDIRECT RELATI NG TO EXEMPT INCOME HAVE TO BE DISALLOWED. HE COMPUTED DISALLOWANCE A T RS.15,44,943/- UNDER RULE 8D @ .5% OF AVERAGE INVESTM ENT AND ADDED TO THE TOTAL INCOME. THE ASSESSEE DISPUTED THE DE CISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE HAD NOT IN CURRED ANY EXPENDITURE FOR EARNING OF EXEMPT INCOME. IT WAS ALSO SUBMITTED THAT PROVISIONS OF RULE 8D WERE NOT APPLICABLE IN VIEW OF THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ AND BOYCE MFG. CO. VS. DCIT (328 ITR 81). THE AO, HOWEVER, DID NOT ACCEPT THE PLEA OF THE ASSESSEE THAT NO EXPENSES WERE INCURRED. IT WAS OBSE RVED BY HIM THAT SALE AND PURCHASE OF SHARES / UNITS OF MUTUAL F UNDS REQUIRED INCURRING OF ADMINISTRATIVE AND MANAGERIAL EXPENSES. E VEN HOLDING BACK THE INVESTMENTS, REQUIRED DECISION AT HIGHEST LEVEL INVOLVING ADMINISTRATIVE AND MANAGERIAL EXPENSES. HE HOWEVER, OB SERVED THAT DISALLOWANCE OF EXPENSES UNDER RULE 8D WAS ON THE HIGHER SIDE. CIT(A) RESTRICTED THE EXPENSES RELATING TO EXEMPT INCO ME AT RS. 5.00 LACS, AGGRIEVED BY WHICH, THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. WE FIND THAT THE SAM E ISSUE OF DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME HAD B EEN ITA NO.5278/M/11 A.Y.6-07 3 CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005-06. IN THAT YEAR ALSO AO HAD MADE DISALLOWANCE U NDER RULE 8D AT RS.25,50,963/-. THE CIT(A) AFTER HOLDING THAT PR OVISIONS OF RULE 8D WERE NOT APPLICABLE, ESTIMATED EXPENSES RELATING TO E XEMPT INCOME AT RS.3.00 LACS. THE TRIBUNAL IN THE ORDER DATED 25.1.20 12 UPHELD THE ORDER OF CIT(A) IN ITA NO. 2407/MUM/2011 FOR ASSESSME NT YEAR 2005-06. FACTS IN THE PRESENT YEAR ARE SIMILAR. IN THIS YEAR AO HAD MADE DISALLOWANCE AT RS.15,44,943/- AND CIT(A) HAS REDU CED THE DISALLOWANCE TO RS.5.00 LACS. CONSIDERING THE DECISION OF TRIBUNAL IN THE EARLIER YEAR THE DISALLOWANCE IS CONSIDERED REASONAB LE AND ORDER OF CIT(A) IS UPHELD. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1.6.2012. SD/- SD/- (B.R. MITTAL ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 1.6.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.