ASST CIT 8(1), MUMBAI V. ENECON INDIA LTD, MUMBAI

ITA 6121/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3380 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 01-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 05-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.6121/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR :2006-07 THE ACIT 8(1), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. ENERCON INDIA LTD., ENERCON TOWER, A-9, VEERA INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (E), MUMBAI-400 053 ') % ./ *+ ./PAN/GIR NO. : AAACE 0139D ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI GIRIJA DAYAL -.), 0 / /RESPONDENT BY : SHRI J.P. BAIRAGRA 0 12% / DATE OF HEARING :1.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT :01.07.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-16, MUMBAI DT.6.6.2011 PERTAINING TO A.Y. 2 006-07. 2. THE REVENUE HAS RAISED 4 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1,2 & 3 RELATE TO APPLICABILITY OF PROVISIONS O F SEC. 14A R.W. RULE 8D. GROUND NO. 4 IS CONSEQUENTIAL TO THE OUTCOME OF THE GRIEVANCE RAISED BY GROUND NO. 1 TO 3. ITA NO.6121/M/2011 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EAR NED DIVIDEND INCOME OF RS. 36,98,997/- WHICH HAS BEEN CLAIMED AS EXEMPT U/ S. 10(34) OF THE I.T. ACT. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT ALLOCATED ANY EXPENSE RELATING TO THE EARNING OF THE EXEMPT INCOM E. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE EXPENDITURE I NCURRED FOR EARNING OF DIVIDEND INCOME SHOULD NOT BE DISALLOWED U/S. 14A R .W. RULE 8D OF THE ACT. ON RECEIVING NO REPLY FROM THE ASSESSEE, THE AO WENT ON TO INVOKE PROVISIONS OF SEC. 14A R.W. RULE 8D OF THE ACT AND COMPUTED THE DISALLOWANCE AT RS. 3,99,17,000/-. 4. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) AND STRONGLY CONTENDED THAT RULE 8D IS PROSPECTIVE AND IS APPLICABLE FROM 2008-09. THE LD. CIT(A) WAS CONVINCED THAT THE AO HAS ERRED IN COMPUTING THE DISALLOWANCE AS PER RULE 8D. HOWEVER , THE LD. CIT(A) WAS ALSO OF THE FIRM OPINION THAT SOME EXPENSES SHO ULD HAVE BEEN ALLOCATED FOR EARNING THE EXEMPT INCOME. THE LD. CIT(A) NOTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 200 5-06 HIS PREDECESSOR HAS CONFIRMED THE ADDITION OF RS. 5 LAKHS. TAKING A LEAF OUT OF THE SAID FINDING OF HIS PREDECESSOR, THE LD. CIT(A) DIRECTED THE AO TO RESTRICT THE DISALLOWANCE AT RS. 7,50,000/-. 5. THE REVENUE IS AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) AND IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. ITA NO.6121/M/2011 3 8. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES. IT IS WELL SETTLED NOW THAT APP LICATION OF RULE 8D IS WITH EFFECT FROM 1.4.2008 AS HAS BEEN HELD BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. VS DCIT REPORTED IN 328 ITR 81. THAT BEING THE FACT OF THE MATTER, TO THIS EXTENT, THE FINDING OF THE LD. CIT(A) ARE CONFIRMED. FURTH ER, WE FIND THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE BASED ON THE FINDINGS IN THE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESS MENT YEAR I.E. 2005- 06. WE, THEREFORE, DO NOT FIND ANY REASON TO INTER FERE OR TAMPER WITH THE FINDINGS OF THE LD. CIT(A). THE DISALLOWANCE AT RS . 7,50,000/- ARE CONFIRMED. GROUND NO. 1,2 & 3 ARE TAKEN TOGETHER A RE DISMISSED. 9. GROUND NO. 4 IS CONSEQUENTIAL. THE AO IS DIRECT ED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF OUR DECISION MENTIONED HEREINABOVE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.2013 &5 0 4( % 6 7&8 1.7.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 01/07/2013 . . ./ RJ , SR. PS ITA NO.6121/M/2011 4 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI