ADDL CIOT 6(2), MUMBAI V. CROMPTON GREAVES LTD, MUMBAI

ITA 5958/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4059 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRADIP N KAPASI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . , , BEFORE SHRI B.R. MITTAL, JM AND SHRI RAJENDRA, AM ./I.T.A. NO.5958/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE 6(2), ROOM NO.562, AAYAKAR BHAVAN, M.K.ROAD, CHURCHGATE, MUMBAI-400020 / VS. M/S CROMPTON GREAVES LTD, 6 TH FLOOR, C.G.HOUSE, DR.A.B.ROAD, PRABHADEVI, MUMBAI-400025. ./ ./PAN/GIR NO. : AAACC3840K ( ! /APPELLANT ) .. ( ' ! / RESPONDENT ) ! / APPELLANT BY : SHRI A.C.TEJPAL, ' ! $ /RESPONDENT BY : SHRI PRADIP N KAPASI $ ( / DATE OF HEARING : 16.07.2013 $ ( /DATE OF PRONOUNCEMENT : 19.07.2013 / O R D E R PER B.R.MITTAL JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSM ENT YEAR 2007-08 AGAINST THE ORDER OF LD. CIT(A) DATED 19.5.2011 ON FOLLOWING GR OUNDS : 2. IN GROUND NO.1 OF THE APPEAL, THE DEPARTMENT HAS DISPUTED THE DELETING THE DISALLOWANCE OF POOJA EXPENSES OF RS.21,77,547/- IN CURRED/PAID. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES. WE OBSERVE THAT THE AO DISALLOWED THE AMOUNT OF RS.21,77,547/- CLAIMED BY THE ASSESSEE TOWARDS POOJA EXPENSES. HOWEVER, IN THE FIRST APPEAL, LD. CIT(A) DELETED THE SAID DISALLOWANCE BY CONSIDERING THE EARLIER ORDERS OF THE TRIBUNAL IN A SSESSEES OWN CASE FOR ASSESSMENT YEARS 1989-90 TO 1997-98 AND ALSO OBSERVING THAT TH E FIRST APPELLATE AUTHORITY ALSO DELETED THE SIMILAR DISALLOWANCE FOR ASSESSMENT YEA RS 2000-01, 2001-02, 2002-03, 2003- 04, 2004-05, 2005-06 AND 2006-07 AFTER OBSERVING T HAT THE FACTS OF THE CASE ARE SIMILAR AS IN THE EARLIER ASSESSMENT YEARS. HENCE THE DEPA RTMENT IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO.5958/MUM/2011 2 4. AT THE TIME OF HEARING, LD. DR RELIED ON THE OR DER OF THE AO AND WHEREAS LD.AR SUBMITTED THAT THE TRIBUNAL ALSO IN THE ASSESSMEN T YEAR 2006-07, IN THE APPEAL FILED BY THE DEPARTMENT AFTER CONSIDERING THE DECISION OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF KOLHAPUR SUGAR MILLS LTD. VS. CIT REPORTED IN 119 ITR 387 (BOM) HAS STATED THAT THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT IS DISTINGUISHABLE AS OBSERVED BY THE TRIBUNAL CONSIDERING THE FACTS OF THE CASE AND ACCO RDINGLY, CONFIRMED THE ORDER OF LD. CIT(A). LD. AR FILED A COPY OF SAID ORDER OF THE TRIBUNAL DATED 13.4.2012 TO SUBSTANTIATE HIS SUBMISSIONS. 5. CONSIDERING THE ORDERS OF AUTHORITIES BELOW AND SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND ALSO EARLIER ORD ERS OF THE TRIBUNAL (SUPRA), WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND RESPECTFULLY FOLLOWING EARLIER ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE U PHOLD THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF POOJA EXPENSES. GROUND NO.1 TAKEN BY THE DEPARTMENT IS REJECTED. 6. IN GROUND NO.2 OF THE APPEAL, THE DEPARTMENT HAS DISPUTED THE ORDER OF LD. CIT(A) IN ALLOWING GUEST HOUSE EXPENSES OF RS.18,36 ,829/-. 7. AT THE TIME OF HEARING, LD.DR SUPPORTED THE ORD ER OF THE AO AND SUBMITTED THAT THE ASSESSEE FAILED TO FURNISH THE DETAILS OF THE G UEST HOUSE EXPENSES AND HENCE THE AO RIGHTLY DISALLOWED THE SAME. ON THE OTHER HAND, LD .AR WHILE SUPPORTING THE ORDER OF LD. CIT(A) SUBMITTED THAT THE EXPENSES CLAIMED WERE PA YMENTS WHICH WERE CONSISTENTLY MADE FROM YEAR TO YEAR AND THE SAID EXPENSES WERE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HE SUBMITT ED THAT SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECE DING ASSESSMENT YEAR VIZ ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 13.4.2012 AND REFERRE D PARA 102 THEREOF. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVE OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT T HE SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL BY FOLLOWING ITS DECISION IN ASSESSEES OWN CASE IN I.T.A.NO.4762/MUM/2003 & ORS HAS DECIDED THE ISSUE BY CONFIRMING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO. FURTHER, WE ALSO OBSERVE THAT LD. CIT(A) HAS STATED THAT SIMILA R DISALLOWANCE MADE BY THE AO IN THE ASSESSMENTS YEARS 2001-02 TO 2006-07 HAD BEEN DELET ED AND HE HAD FOLLOWED THE EARLIER DECISION OF LD. CIT(A). SINCE THE LD. DR HA S FAILED TO BRING ANY EVIDENCE TO CONTROVERT THE ABOVE FACTS , WE HOLD THAT THERE IS NO REASON TO INTERFERE WITH THE ORDER I.T.A. NO.5958/MUM/2011 3 OF LD. CITY(A). THEREFORE, WE UPHOLD THE ORDER OF L D. CIT(A) AND REJECT GROUND NO.2 TAKEN BY THE DEPARTMENT. 9. IN GROUND NOS.3 AND 4 OF THE APPEAL, THE DEPARTM ENT HAS DISPUTED THE ORDER OF THE LD. CIT(A) TO RESTRICT THE DISALLOWANCE TO 10 % OF THE EXEMPT INCOME RECEIVED BY ASSESSEE U/S 14A OF THE INCOME TAX ACT, 1961 (THE A CT) AS AGAINST RS.19.72 CRORES MADE BY AO. 10. DURING THE COURSE OF HEARING, LD. DR RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE DISALLOWANCE MADE BY AO IS JUSTIFIED. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF ITS S ISTER CONCERN ABOUT 10 TO 15 YEARS BACK. HE FURTHER SUBMITTED THAT SIMILAR ISSUE HAD BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL BY FOLLOWING THE ORDER OF EARLIER YEAR IN ITA NO.4762/MUM/2003 SET ASIDE THE ORDER OF LD. CIT(A) AND REMITTED THE MATTER BACK TO THE FILE OF AO FOR FRE SH EXAMINATION PARTICULARLY IN THE LIGHT OF GUIDELINES GIVEN BY THE HON'BLE BOMBAY HIGH COUR T OF IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT REPORTED IN (328 ITR 81). H OWEVER, LD. AR SUBMITTED THAT DISALLOWANCE AS MADE BY LD. CIT(A) OF 10% OF THE E XEMPT INCOME BE CONFIRMED INSTEAD OF RESTORING THE MATTER TO AO. 11. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES AS WELL AS EARLI ER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA). WE OBSERVE THAT AO HAS APPLIED RULE 8D OF INCOME TAX RULES, 1962 FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 14A OF THE ACT. HOWEVER, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 AND THEREAFTER. THEREFORE, AO WHILE COMPUT ING THE DISALLOWANCE U/S 14A HAS WRONGLY APPLIED RULE 8D. WE OBSERVE THAT LD. CI T(A) HAS STATED THAT THERE IS NO NEXUS ESTABLISHED BY THE AO BETWEEN THE INTEREST P AYMENT AND THE EXEMPT INCOME. FURTHER, LD. CIT(A) HAS ALSO NOT GIVEN ANY REASON T O RESTRICT THE DISALLOWANCE TO 10% OF THE EXEMPT INCOME RECEIVED BY THE ASSESSEE IN THE A SSESSMENT YEAR UNDER CONSIDERATION. BE THAT AS IT MAY, WE ARE OF THE CON SIDERED VIEW, IN THE INTEREST OF CONSISTENCY AND IN VIEW OF DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER YEARS, THE MATTER BE RESTORED TO AO FOR HIS FRESH CONSIDERATION. THEREFORE, WE RESTORE THE ISSUE TO THE FILE OF AO BY SETTING ASIDE THE O RDERS OF AUTHORITIES BELOW. ACCORDINGLY, GROUND NOS.3 AND 4 OF THE APPEAL TAKEN BY THE DEPAR TMENT ARE ALLOWED FOR STATISTICAL PURPOSE. I.T.A. NO.5958/MUM/2011 4 12. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS ALLOWED IN PART. ORDER PRONOUNCED AFTER HEARING LD. REPRESENTATIVE OF THE PARTIES IN THE OPEN COURT ON 19TH JULY, 2013 $ / 0 19 TH JULY, 2013 $ SD/- SD/- (RAJENDRA) (B.R. MITTAL) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 0 DATED 19/07/2013 . . ./ SRL , SR. PS ! '! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. ' ! / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 5 '7 , ( 7 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI