GLOBAL AVIATION SERVICES P. LTD, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 5281/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62298 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Opportunity of being heard
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE SHIRI D. MANMOHAN, HON'BLE VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. : 5281/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. GLOBAL AVIATION SERVICES P. LTD. NKM INTERNATIONAL HOUSE, B.M. CHINOY MARG, BACKBAY RECLAMATION, MUMBAI-400 020 PAN NO: AAACG 4127 F THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 22 & 30 MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI HARIOM TULSYAN RESPONDENT BY : SHRI A. K. NAYAK DATE OF HEARING : 10.04.2012 DATE OF PRONOUNCEMENT : 16.04.2012 ORDER PER N.K. BILLAIYA, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-39, MUMBAI DATED 31.03.2010. 2. THE ONLY GROUND OF APPEAL SHOWS THE GRIEVANCE OF THE APPELLANT AGAINST THE ORDER OF THE LD. CIT(A)-39, MUMBAI. WH O HELD THAT THE INTEREST TO THE TUNE OF `. 41,05,081/- SHOULD BE CONSIDERED FOR WORKING OUT THE DISALLOWANCE U/S.14A OF THE ACT. BRIEFLY S TATED THE FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY ENGAGED IN THE BUSINESS OF GENERAL SALES AGENTS FOR INTERNATIONAL AIRLINES AND FULL FL EDGED MONEY CHANGERS. ITA NO : 5281 /MUM/2010 M/S. GLOBAL AVIATION SERVICES P. LTD. 2 FOR THE YEAR UNDER CONSIDERATION, THE RETURN OF INC OME DECLARING THE TOTAL INCOME OF `. 5,94,41,960/- WAS FILED ON 16.11.2007. THIS RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY NO TICES U/S.143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE A SSESSEE. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. FOUN D THAT THE ASSESSEE HAS DECLARED DIVIDEND OF `. 4,00,039/- AND HAS CLAIMED THE SAME AS EXEMPTION U/S.10(34) OF THE ACT. THE A.O. ASKED TH E ASSESSEE AS TO WHY THE PROPORTIONATE EXPENSES ATTRIBUTABLE TO THE DIVI DEND INCOME SHOULD NOT BE DISALLOWED U/S.14A READ WITH RULE 8D. IN RE PLY TO THIS, THE ASSESSEE VIDE LETTER DATED 10.11.2009 WORKED OUT TH E DISALLOWANCE AT `. 6,99,840/-. THE A.O. WAS NOT SATISFIED WITH THE WO RKING OF THE ASSESSEE AND WENT ON TO WORK OUT THE DISALLOWANCE U /S.14A READ WITH RULE 8D. THUS THE AGGREGATE DISALLOWANCE WORKED OU T TO `. 14,14,985/- AND ACCORDINGLY, THE A.O. ADDED BACK THIS AMOUNT TO THE RETURN INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THIS, THE ASSESSEE TOOK THE MATTER BEFORE THE LD. CIT(A)-39, MUMBAI. 4. BEFORE THE LD. CIT(A) THE ASSESSEE POINTED OUT T HAT AS FAR AS THE INVESTMENTS ARE CONCERNED, THE SAME HAD BEEN MADE I N THE EARLIER YEARS, TO SUBSTANTIATE THE ASSESSEE FILED A COMPARATIVE CH ART WHICH IS AS UNDER:- PARTICULARS 31.03.07 31.06.06 31.03.05 31.03.04 31.03.03 31.03. 02 INVESTMENT AS PER AUDITED BALANCE SHEET 47058585 47058585 45894654 45733888 45713888 463851 48 4.1 THE ASSESSEE FURTHER EXPLAINED THAT THE LOANS F ROM THE BANKS HAVE BEEN TAKEN FOR SPECIFIC PURPOSES LIKE PURCHASE OF F IXED ASSETS AND NO AMOUNT FROM BORROWED CAPITAL HAS BEEN INVESTED IN T AX FREE INVESTMENT. ITA NO : 5281 /MUM/2010 M/S. GLOBAL AVIATION SERVICES P. LTD. 3 THE LD. CIT(A) AFTER CONSIDERING THE FACTS ON THE S UBMISSION OF THE ASSESSEE CAME TO THE CONCLUSION THAT OUT OF THE TOT AL DISALLOWANCE MADE BY THE A.O. BANK CHARGES OF `. 3,04,274/- AND BANK CHARGES FOR TC SETTLEMENT OF `. 39,514/- CANNOT BE CONSIDERED AS INTEREST PAYMENTS AND FURTHER THESE EXPENSES ARE NOT AT ALL CONNECTED FOR EARNING TAX FREE INCOME AND ACCORDINGLY DIRECTED THE A.O. TO EXCLUDE THESE TWO EXPENSES FROM INTEREST EXPENDITURE AND THEREAFTER WORK OUT T HE DISALLOWANCE UNDER RULE 8D OF THE I.T. RULES. 5. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPE AL BEFORE US. 6. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE S TATED THAT THE WORKING OF THE DISALLOWANCE U/S.14A BY THE A.O. BY APPLYING RULE 8D IS BAD IN LAW, AS RULE 8D IS APPLICABLE FROM THE A.Y. 2008-09 AS HAS BEEN HELD BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CAS E OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT REPORTED IN 328 ITR 81. THE LEARNED DR SUPPORTED THE ASSESSMENT ORDER. 7. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES. UNDOUBTEDLY, THE A.O. HAS APPLIED RULE 8D HOLDING T HAT RULE 8D IS RETROSPECTIVE IN NATURE. IT IS NOW SETTLED THAT RU LE 8D IS PROSPECTIVE AND IS APPLICABLE ON AND FROM THE A.Y. 2008-09. WE DIR ECT THE A.O. TO RE- CALCULATE THE DISALLOWANCE, IF ANY , WITHOUT APPLYI NG RULE 8D ON THE DIVIDEND INCOME SHOWN AT `. 4,00,039/-. THE A.O. IS FURTHER DIRECTED TO VERIFY THE CONTENTION OF THE APPELLANT THAT THE INV ESTMENTS HAVE NOT BEEN MADE OUT OF BORROWED CAPITAL, AFTER GIVING THE APPE LLANT AN OPPORTUNITY OF BEING HEARD. WE RESTORE THIS MATTER BACK TO THE FI LE OF THE A.O. AS DIRECTED HERE IN ABOVE. ITA NO : 5281 /MUM/2010 M/S. GLOBAL AVIATION SERVICES P. LTD. 4 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF APRIL, 2012. SD/- SD/- ( D. MANMOHAN ) ( N.K. BILLAIYA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT: 16.04.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, G - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI