K.R. CORPORATION, MUMBAI V. ITO 14(3)(2), MUMBAI

ITA 6189/MUM/2010

• Counselvise Citation: 618919914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE SHIRI RAJENDRA SINGH, A.M. ITA NO. : 6189/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S. K. R. CORPORATION 689, GOVIND CHOWK, M. J. MARKET, MUMBAI-400 002 PAN NO : AAAFK 7088 A VS. THE INCOME TAX OFFICER, WARD - 14(3)-2, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI P. C. MAURYA DATE OF HEARING : 29 .11.2011 DATE OF PRONOUNCEMENT : 29.11. 2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 18.05.2010 OF THE LD. CIT(A)-25 FOR THE ASSESSMENT YEAR 2006-07. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD RECEIVED DI VIDEND INCOME OF `. 2,17,633/- AND LONG TERM CAPITAL GAIN ON `. 650/- WHICH WERE EXEMPT ITA NO : 6189/MUM/2010 M/S. K.R. CORPORATION 2 FROM TAX. IT WAS ALSO NOTED BY HIM THAT THE ASSESSE E HAD NOT MADE DISALLOWANCE OF EXPENSES RELATING TO THE EXEMPT INC OME. THE AO FURTHER NOTED THAT THE ASSESSEE HAD CLAIMED INTEREST EXPENS ES OF `. 1,05,027/- ON BORROWED FUNDS AND HAD ALSO INCURRED OTHER EXPENSES . HE, THEREFORE, DISALLOWED EXPENSES RELATING TO EXEMPT INCOME AS PE R THE METHOD PRESCRIBED IN RULE 8D OF SECTION 14A OF THE I.T. AC T. THE TOTAL DISALLOWANCE MADE BY HIM WAS `. 2,00,982/-. 3. IN APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE S MADE BY AO AS PER THE METHOD PRESCRIBED IN RULE 8D AGGRIEVED BY W HICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. I HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF EXPENSES R ELATING TO THE EXEMPT INCOME U/S.14A OF THE I.T. ACT. UNDER THE PROVISION S OF SECTION 14(2) AND 14(3), DISALLOWANCE OF EXPENSES RELATING TO THE EXE MPT INCOME IS REQUIRED TO DONE AS PER THE METHOD PRESCRIBED BY THE GOVERNM ENT. THE GOVERNMENT HAVE SINCE NOTIFIED RULE 8D FOR COMPUTAT ION OF DISALLOWABLE EXPENSES. THE HON'BLE HIGH COURT OF BOMBAY IN CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD (328 ITR 81) HAVE HELD TH AT RULE 8D WOULD APPLY ONLY FROM THE ASSESSMENT YEAR 2008-09. IN RES PECT OF THE PRIOR YEARS, THE HON'BLE HIGH COURT HELD THAT EXPENSES RE LATING TO THE EXEMPT INCOME BOTH DIRECT AND INDIRECT HAVE TO BE DISALLOW ED ON REASONABLE ITA NO : 6189/MUM/2010 M/S. K.R. CORPORATION 3 BASIS AFTER ALLOWING AN OPPORTUNITY OF HEARING TO T HE ASSESSEE. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT APPEAL IS 2 006-07 AND, THEREFORE, RULE 8D WILL HAVE NO APPLICATION. WE, TH EREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF THE AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LI GHT OF JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF GODREJ & BO YCE MANUFACTURING COMPANY LTD (SUPRA) AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON TO DAY I.E. 29 TH NOVEMBER, 2011. SD/ - ( RAJENDRA SINGH ) ACCOUNTANT MEMBER MUMBAI, DT: 29/11/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, SMC - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI