WARTSILA INDIA LTD, NAVI MUMBAI V. ASST CIT CIR 3(3), MUMBAI

ITA 6065/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0591 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 17-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: J D MISTRI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

WARTSILA INDIA LIMITED ITA 6065 /M/201 3 1 + IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI . . , , BEFORE SHRI N K BILLAIYA , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBERITA ITA NO. : 6065 /MUM/20 1 3 (ASSESSMENT YEAR: 2007 - 0 8 ) WARTSILA INDIA LIMITED , KESAR SOLITAIRE, 21 ST FLOOR, SECTOR 19, PALM BEACH ROAD, SANPADA , NAVI MUMBAI - 400 705 .: PAN: A AACW 0345 D VS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(3) , MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J D MISTRI RESPONDE NT BY : SHRI PAVAN KUMAR BEERLA /DATE OF HEARING : 05 - 0 3 - 201 5 / DATE OF PRONOUNCEMENT : 22 - 0 4 - 201 5 ORDER , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSE SSEE AGAINST THE ORDER OF CIT(A) - 7 , MUMBAI, DATED 29 . 08 .201 3 , RAISING THE FOLLOWING GROUNDS: 2. THE SOLITARY ISSUE PERTAIN S TO COMPUTATION OF DISALLOWANCE U/S 14A. THE ISS UE IN QUESTION IS IN THE 2 ND ROUND. IN THE FIRST ROUND, THE CIT(A) DIRECTED THE AO TO DELETE THE DISALLOWANCE MADE U/S 14A. 3. IN THE ORDER GIVING EFFECT, THE AO HELD, THE SUBMISSION OF THE ASSESSEE HAS BEEN PERUSED AND TAKEN INTO CONSIDERATION. AS PER THE RATIO OF THE DECISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD: [328 ITR 81], RULE 8D OF THE I .T. RULES, 1962 IS NOT APPLICABLE FOR THE AY UNDER CONSIDERATION. IT IS ALSO OBSERVED THAT THAT THERE ARE NO WARTSILA INDIA LIMITED ITA 6065 /M/201 3 2 DIRECT EXPENSES RELATABLE TO EARNING OF EXEMPT INCOME AND NO INTE REST EXPENSES ARE FOUND TO BE ATTRIBUTABLE TO THE SAME BUT AT THE SAME TIME IT CANNOT BE COMPLETELY RULED OUT THAT ASSESSEE MUST HAVE INCURRED SOME ADMINISTRATIVE EXPENSES TO EARN EXEMPT INCOME. HENCE ON A REASONABLE BASIS, THE DISALLOWANCE U/S 14A IS MADE @ 0.5% OF THE AVERAGE OF VALUE OF INVESTMENTS I.E. % OF RS. 933 ,610,683/ - =RS. 46,68,053/ - . ACCORDINGLY, THE ASSESSEE GETS RELIEF OF RS. 1,14,17,736/ - UNDER THIS HEAD. THE AO, THEREFORE, REDUCED THE DISALLOWANCE TO RS. 1,14,17,736/ - . 4. THIS DISALLOWANCE WAS FURTHER RESTRICTED TO RS. 46,68,053/ - BY THE CIT(A), PLAC ING RELIANCE ON THE DECISION OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT, REPORTED IN 328 ITR 81 (BOM). 5. BEFORE US, THE AR SUBMITTED THAT IN SO FAR AS APPLICATION OF RULE 8 IS CONCERNED, IT IS TO BE BROUGHT UNDER USE FROM ASSESSMENT YEAR 2007 - 08, WHERE THER E IS NO APPLICATION OF RULE 8D. BUT AS PER GODREJ & BOYCE CASE, SOME REASONABLE AMOUNT HAS TO BE DISALLOWED. 6. THIS REASONABLE AMOUNT HAS BEEN MENTIONED BY THE HONBLE HIGH COURT IN THE CASE OF CIT VS GODREJ AGROVET LTD IN ITA NO. 934 OF 2011, AS 2% OF T HE EXEMPT INCOME. 7. THE AR FURTHER SUBMITTED THAT IN ASSESSEES OWN CASES IN ITAS NO. 7893 AND 8039/MUM/2010 FOR ASSESSMENT YEAR 2006 - 07, THE BENCH AT MUMBAI ITAT HAS TAKEN A VIEW THAT 4% OF THE EXEMPT INCOME SHALL BE REASONABLE. 8. THE AR, THEREFORE SU BMITTED THAT AN ANOMALY HAS ARISEN, WHEREIN THE JURISDICTIONAL HIGH COURT IS OF THE VIEW THAT 2% OF EXEMPT INCOME IS REASONABLE BUT ON THE OTHER HAND IN THE CASE OF THE ASSE S SEE, THE ITAT HAS TAKEN THE VIEW THAT 4% OF EXEMPT INCOME IS REASONABLE. WARTSILA INDIA LIMITED ITA 6065 /M/201 3 3 9. THE A R, THEREFOR E SUBMITTED THAT AN APPROPRIATE DECISION NEEDS TO BE TAKEN. 10. THE DR PLACED RELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE CIT(A) HAS ALREADY GIVEN SUBSTANTIAL RELIEF, THEREFORE, NO FURTHER RELIEF WAS JUSTIFIED. 11. WE HAVE HEARD THE ARGUMENTS. AT THE OUTSET, WE REJECT THE SUBMISSION OF THE DR. THIS BRINGS US TO THE CONTROVERSY THAT HAS ARISEN. HONBLE BOMBAY HIGH COURT HAS ACCEPTED 2% AS REASONABLE DISALLOWANCE, BUT THE ITAT HAS TAKEN 4%. SINCE THE ISSUE PERTAINS AS TO WHICH FORUM HAS TO BE FOLLOWED, WE ARE OF THE VIEW THAT HONBLE JURISDICTIONAL HIGH COURT BEING A HIGHER JURIDICAL FORUM AND HAVING JURISDICTION OF SUPERIN TEN DENCE OVER ALL COURTS IN THE STATE OF MAHARASHTRA, AS PER ARTICLE 227 OF THE CONSTITUTION, WE WILL PLACE RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN RESTRICTING THE DISALLOWANCE AT 2% OF THE EXEMPT INCOME. 12. WE HOLD ACCORDINGLY AND AS RESULT, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO COMPUTE THE DISALLOWANCE AT 2% OF THE EXEMPT INCOME CLAIMED BY THE ASSESSEE. 13. GROUND NO. 1 AND ITS SUB GROUNDS ARE TREATED AS PARTLY ALLOWED. 14. AS A RESULT, THE APPEAL AS FILED BY THE ASSESSED IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL , 2015. SD/ - SD/ - ( . . ) ( ) ( N K BILLAIYA ) ( VIVEK VARMA ) ACCOUNTANT MEMB ER JUDICIAL MEMBER M UMBAI, DATE: 22 ND APRIL , 201 5 WARTSILA INDIA LIMITED ITA 6065 /M/201 3 4 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 7 , MUMBAI. 4) THE CIT - 3 , MUMBAI/CIT - 3 , MUMBAI . 5) , , / THE D.R. G BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS