RAJSHRI PRODUCTIONS P. LTD, MUMBAI V. ADDL CIT 11(1), MUMBAI

ITA 6004/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8424 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHY NAIK
• Assessee Lawyers: K K BAARJATYAS C BANDI
• Keywords: Earning of tax free income
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI P.M.JAGTAP (ACCOUNTANT MEMBER) ITA NO.6004/MUM/2011 ASSESSMENT YEAR: 2007-08 RAJSHRI PRODUCTIONS P. LTD., BHAVANA, 1 ST FLOOR, 422, VEER SAVARKAR ROAD, PRABHADEVI, MUMBAI-25. PA NO.AAACR 4139 G ADDL. CIT 11(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI K.K.BAARJATYA/S.C.BANDI RESPONDENT BY: SHRI PARTHASARTHY NAIK DATE OF HEARING: 5 .11.2012 DATE OF PRONOUNCEMENT: 5 .11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2007-08 AGAINST ORDER DATED 30.6.2011 OF LD CIT(A)-3, MUMBAI ON FOLLOWIN G GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C.I.T (APPEALS) -3 ERRED IN CONFIRMING THE DISALLOW ANCE OF RS. 1,14,774/- TOWARDS INDIRECT EXPENSES U/S 14-A OF THE L.T. ACT IN RESPECT OF THE EXEMPT INCOME U/S 10 (34) AND 10 (38) OF THE I.T. A CT CALCULATED ON THE BASIS OF .5% OF AVERAGE INVESTMENT. 2. THE LEARNED C.I.T (APPEALS) -3 FAILED TO APPRECI ATE THAT THE AO HAS NOT GIVEN ANY REASONS NOR THE DETAILS OF THE EXPENSES W HICH ARE CONSIDERED DISALLOWABLE AS PERTAINING TO THE AFORESAID EXEMPT INCOME. HE FAILED TO RECORD A FINDING AS CONTEMPLATED BY SECTION 14-A (2 ) HAVING REGARD TO THE ACCOUNTS AND OTHER FACTS AND FAILED TO ESTABLIS H ANY NEXUS WHATSOEVER WITH ANY OF THE ITEMS OF EXPENDITURE AND EXEMPT INCOME. ITA NO.6004/MUM/2011 ASSESSMENT YEAR: 2007-08 2 3. THE LEARNED CIT (APPEALS) -3 ERRED IN ESTIMATING THE DISALLOWABLE EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AT . 5% OF THE AVERAGE INVESTMENT WHICH IS HIGHLY UNJUST ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. 2. THE RELEVANT FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS EA RNED EXEMPT DIVIDEND INCOME OF RS.5,47,869 AND LONG TERM CAPITAL GAINS OF RS.1,78, 836. HOWEVER, RELYING ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF DAGA CAP ITAL MANAGEMENT P LTD., (I.T.A. NO.8075/MUM/2003)/117 ITD 169(MUM)(SB), THE AO APPL IED RULE 8D AND DISALLOWED RS.5,20,636. ON APPEAL, LD CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1,14,774 AS AGAINST DISALLOWANCE OF RS.5,20,636 MADE BY THE AO TOWARDS DIRECT EXPENSES CONSIDERING 0.5% OF AVERAGE INVESTMENT. HENCE, THI S APPEAL BY ASSESSEE. 3. AT THE TIME OF HEARING, LEARNED REPRESENTATIVES OF BOTH PARTIES AGREED THAT SO FAR AS THE QUESTION OF RULE 8D IS CONCERNED, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESEE BY THE HONBLE JURISDICTIONAL HIGH COURTS JUDGEMEN T IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81), WHEREIN, IT HAS BEEN H ELD THAT RULE 8D OF THE INCOME TAX RULES, 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. F ROM A.Y. 2008-09. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CASE IS 2007-08 AND, THEREF ORE, RULE 8D IS NOT APPLICABLE IN THE PRESENT CASE. THE HONBLE HIGH COURT HAS ALSO HELD THAT A REASONABLE DISALLOWANCE FOR EXPENSES INCURRED IN EARNING DIVIDEND INCOME IS NEV ERTHELESS TO BE COMPUTED BY THE AO. LD REPRESENTATIVES OF PARTIES ALSO SUBMITTED THAT MATTER BE RESTORED TO THE FILE OF AO FOR FRESH CONSIDERATION FOR MAKING THE DISALLOWA NCE TO BE MADE IN RESPECT OF EXEMPTED INCOME U/S.14A OF THE ACT. 4. CONSIDERING ABOVE SUBMISSIONS OF LD REPRESENTATI VES OF PARTIES AND THE FACT THAT RULE 8D IS NOT APPLICABLE TO A.Y. 2007-08 IN VIEW O F DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO. LT D(SUPRA), WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE OF AO FOR HIS FRESH CONSIDERATION. HENCE, GROUND OF APPEAL TAKEN BY ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.6004/MUM/2011 ASSESSMENT YEAR: 2007-08 3 5. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5 TH NOVEMBER, 2012 SD/- (P.M.JAGTAP) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 5 TH NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),3, MUMBAI 4. COMMISSIONER OF INCOME TAX, 11 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI