ITO 8(2)-3, MUMBAI V. SANJAY MAGANLAL MEHTA, MUMBAI

ITA 5598/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4529 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 02-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK OJHA
• Keywords: Earning of tax free income; Tax effect
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI RAM LAL NEG I (JM) ITA NO. 5598 /MUM/2013 ASSESSMENT YEAR: 2010-11 THE INCOME TAX OFFICER- 8 (2)-3, ROOM NO. 213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. VS. SHRI. SANJAY MAGANLAL MEHTA. 501, A-WING, JAISHANKAR KRUPA C.H.S., OLD NAGARDAS ROAD, ANDHERI (E), MUMBAI- 400069. PAN- AACPM6147L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. VIVEK OJHA RESPONDENT BY : SHRI. JITENDRA JAIN DATE OF HEARING: 04/01/2016 DATE OF PRONOUNCEMENT: 04/01/2016 O R D E R PER JASON P. BOAZ, AM THE AFORESAID APPEAL HAS BEEN FILED BY THE REV ENUE AGAINST IMPUGNED ORDER DATED 04/06/2013 PASSED BY THE CIT( A)-17, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2010-11, ON THE FOLLOWING GROUNDS:- 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISAL LOWANCE OF RS. 11,60,9671- MADE BY THE ASSESSING OFFICER U/S 14A O F THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE I. T. RULES, 1962 WITHOUT APPRECIATING THAT RULE 8D HAS BEEN INSERTED BY THE FINANCE ACT, 2008, WITH EFFECT FROM 24/03/2008, AND HENCE 2 ITA NO. 5598 /MUM/2013 ASSESSMENT YEAR: 2010-11 SQUARELY APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION.' 2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN IMPORTING THE RATI O OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS RELIANCE UTILITIES AND POWER LTD (313 ITR 340) WITH OUT APPRECIATING THAT- A) THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE A BOVE CITED CASE PERTAINED TO DISALLOWANCE OF INTEREST ON BORRO WED FUNDS U/S 36(1)(III) FOR AY 1999-2000 AND NOT IN RESPECT OF DISALLOWANCE U/S 14A AND HENCE NOT APPLICABLE TO TH E INSTANT CASE; B) IN VIEW OF THE PROPORTIONATE DISALLOWANCE STIPUL ATED IN RULE 8D(2)(II), NEXUS BETWEEN INVESTMENTS VIS-A-VIS BORR OWED OR OWN FUNDS IS NO LONGER REQUIRED TO BE ESTABLISHED BY TH E ASSESSING OFFICER; C) ONCE RULE 8D IS INVOKED, THE DISALLOWANCE HAS TO BE WORKED OUT AS PER THE FORMULA PRESCRIBED THEREIN AND THERE IS NO SCOPE FOR ANY DEVIATION THERE FROM. ' 3) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISAL LOWANCE U/S 14A READ WITH RULE 8D ON THE GROUND THAT THERE IS N O DISALLOWANCE U/S 14A IN THE EARLIER YEARS, WITHOUT APPRECIATING THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABL E TO THE PROCEEDINGS UNDER THE INCOME-TAX ACT. 3 ITA NO. 5598 /MUM/2013 ASSESSMENT YEAR: 2010-11 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT NETTI NG OF INTEREST IS TO BE DONE BEFORE DISALLOWANCE U/S 14A, WITHOUT APPRECIATING THAT ONCE THE ASSESSEE HAS INCURRED IN TEREST EXPENDITURE IN RELATION TO EXEMPT INCOME, THE ENTIR E INTEREST WOULD BE SUBJECT TO DISALLOWANCE AND CANNOT BE REDU CED BY RECEIPT OF INTEREST WHICH IS NOT RELATED THERETO AN D WHICH WOULD RESULT IN CONTRAVENING CLAUSE 2(II) OF RULE 8D , AS HELD BY THE HON'BLE ITAT SPECIAL BENCH DELHI IN PARA 43 OF ITS ORDER IN THE CASE OF CHEMINVEST LTD. VS. ITO 317 ITR 86.' 5) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE R ESTORED. 6) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. AT THE OUTSET, IT IS NOTICED THAT, THE DISPUTE D ISSUE IS ONLY FOR RS. 11,60,962/- AND THE TAX EFFECT ON THIS AMOUNT I .E. RS. 6,10,060/-, IS BELOW THE MONETARY LIMIT OF RS. 10 L AKHS. AS PER THE LATEST CBDT CIRCULAR NO. 21 OF 2015, DATED 10 TH DECEMBER, 2015, NEW GUIDELINES OF MONETARY LIMIT FOR FILING OF APPE ALS BY THE DEPARTMENT HAS BEEN ISSUED, WHEREBY THE TAX EFFECT FOR FILING OF APPEAL BEFORE THE ITAT HAS BEEN PRESCRIBED AT RS. 1 0 LACKS. IN THE SAID CIRCULAR, IT HAS BEEN SPECIFICALLY CLARIFIED T HAT THE SAID INSTRUCTION WILL APPLY RETROSPECTIVELY TO ALL THE P ENDING APPEALS. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AND IS DISMISSED IN LIMINE . 4 ITA NO. 5598 /MUM/2013 ASSESSMENT YEAR: 2010-11 ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2016 SD/- SD/- ( RAM LAL NEGI ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 04/01/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &'( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, M PRAMILA