INDIA ADVANTAGE SECURITIES LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 6190/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8670 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 10-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER.. I.T.A. NO.6190/MUM/2010. ASSESSMENT YEAR : 2007-08. M/S INDIA ADVANTAGE SECURITIES LTD., DY. COMMISSIONER OF 4 TH FLOOR, OM PLAZA, VS. INCOME-TAX, VASANJI LALJI ROAD, KANDIVALI (W), RANGE- 4(1), MUMBAI 400067. MUMBAI. PAN AADCP5317M APPELLANT. RESPONDENT . APPELLANT BY : SHRI DIV YESH I SHAH. RESPONDEN T BY : SHRI RAKESH RANJAN. DATE OF HEARING : 10-10-2012 DATE OF PRONOUNCEMENT : 12-10-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-8, MUMBAI DATED 14-05-2010 AND THE SO LITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS.6,99,140/- M ADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF INCOME-TAX RULES, 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF SHARE BROKING AS A MEMBER OF BOMBAY STO CK EXCHANGE AND NATIONAL STOCK EXCHANGE. THE RETURN OF INCOME FOR THE YEAR U NDER CONSIDERATION WAS FILED 2 ITA NO.6190/MUM/2010 BY IT ON 31-08-2007 DECLARING TOTAL INCOME OF RS.80 ,91,287/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.8,46,458/- EARNED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWAN CE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO EARNING OF THE SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE AO AS REQUIRED BY SECTION 14A. THE AO, THEREFOR E, WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME AT RS.6,99,140/- BY APPLYING RULE 8D OF INCOME-TAX RULES AND MADE DI SALLOWANCE TO THAT EXTENT U/S 14A. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT P. LTD. 117 ITD 169 (MUM.)(S.B.) WHEREIN IT WAS HELD THAT RULE 8D SHALL APPLY RETROSPECTIVELY. AGGRIEVED BY T HE ORDER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEA L BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRES ENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN THIS APPEAL NOW STANDS SQUARELY C OVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MANUFACTURING CO. LTD. (2010) 234 CTR (BOM) 1, WHEREIN IT HAS BEEN HELD TH AT RULE 8D OF INCOME-TAX RULES, 1962 IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2007-08. AS FURTHER HELD BY HONBLE HIGH COURT, THE DISALLOWANCE U/S 14A FOR TH E YEARS PRIOR TO ASSESSMENT YEAR 2007-08 HAS TO BE MADE BY ADOPTING SOME REASON ABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTION AL HIGH COURT, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE TH E DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY APPLYING SOME REASONABLE METHOD AFT ER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 3 ITA NO.6190/MUM/2010 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH DAY OF OCT. , 2012. SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 12 TH OCT., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENC HES, WAKODE MUMBAI.