SHANKAR PACKAGINGS LATD, MUMBAI V. ADDL CIT RG 5(3), MUMBAI

ITA 5551/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55338 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Keywords: Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 5551/MUM/2010 ASSESSMENT YEAR : 2006-07 SHANKAR PACKAGINGS LTD., APPELLANT 303, TURF ESTATE, OFF. DR.E. MOSES ROAD, SHAKTI MILL LANE, MAHALAXMI(WEST), MUMBAI 400 011. (PAN AAACS8076P) VS. ADDL. COMMISSIONER OF INCOME TAXR, RESPONDENT RANGE 5(3), AAYAKAR BHAVAN, MUMBAI 400 020. APPELLANT BY : MR. APURVA SHAH RESPONDENT BY : MR. G.P. TRIVEDI DATE OF HEARING : 29/09/2011 DATE OF PRONOUNCEMENT : 30/09 /2011 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)- 9, MUMBAI, PASSED ON 08/06/2010 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- . THE LEARNED CIT(A) ERRED:- 1.1 IN HOLDING THAT RULE 8D WAS TO BE APPLIED IN TH E ASSESSEES CASE. 1.2 IN CONFIRMING THE DISALLOWANCE MADE BY AO U/S 1 4A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 BY HOLDING THAT THE SAID RULE IS APPLICABLE RETROSPECTIVELY. 1.3 IN NOT APPRECIATING THAT NO APPRECIABLE EXPENSE HAS BEEN INCURRED TO EARN THE SAID INCOME AND FURTHER IN NOT APPRECIATING THE APPELLANTS PLEA OF THE BASIS WHICH COULD HAVE BEEN USED TO COMPUTE SUCH EXPENSES. ITA NO. 5551/MUM/2010 SHANKAR PACKAGINGS LTD. 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD RECEIVED DIVIDEND OF RS. 19,04,764/- WHICH ARE EXEM PT FROM TAX. SINCE THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE OF EXPEN SES INCURRED IN RELATION TO EARNING OF DIVIDEND, THE AO APPLIED THE PROVISIONS OF RULE 8D AND MADE DISALLOWANCE OF RS. 33,99,737/-. AGGRIE VED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT N O APPRECIABLE EXPENSES WERE SPECIFICALLY INCURRED TO EARN DIVIDEN D INCOME. IT WAS SUBMITTED THAT A DISALLOWANCE COULD HAVE BEEN DONE ON PRO-RATA BASIS OUT OF ADMINISTRATIVE EXPENSES ACTUALLY INCURRED DU RING THE YEAR AND ACCORDINGLY THE DISALLOWANCE SHOULD HAVE BEEN RESTR ICTED TO RS. 1,09,388/-. IT WAS CLAIMED THAT PROVISIONS OF RULE 8D CAN BE APPLIED TO ONLY WHERE IT IS CLAIMED THAT NO EXPENSES ARE IN CURRED TO EARN TAX FREE INCOME OR WHERE THE CORRECTNESS OF CLAIM OF TH E ASSESSEE REGARDING EXPENSES INCURRED IN RELATION TO EARNING TAX FREE INCOME IS NOT ACCEPTABLE. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, THE CIT(A) HELD THAT THE ASSESSEE IS CLAIMING THAT IT H AS NOT INCURRED ANY EXPENSES TO EARN DIVIDENDS AND ACCORDING TO THE PRO VISIONS OF SUB- SECTION (3) OF SECTION 14A, DISALLOWANCE CAN BE MAD E IN ACCORDANCE WITH THE PRESCRIBED METHOD GIVEN IN SUB-SECTION (2) WHICH IS RULE 8D. HE, THEREFORE, CONFIRMED THE ORDER OF THE AO. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE JUDG MENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ & BOYCE MFG. CO. LTD., [2010] 328 ITR 81 (BOM.) WHEREIN THE HON BLE COURT HELD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HA D TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. F OR THAT PURPOSE, ITA NO. 5551/MUM/2010 SHANKAR PACKAGINGS LTD. 3 THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE A PPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE AO SHOULD PROV IDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA), WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2011 UPON CONCLUSION OF HEARING. SD/- SD/- (R.K. PANDA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH SEPTEMBER, 2011 KV ITA NO. 5551/MUM/2010 SHANKAR PACKAGINGS LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.