MAHYCO MONSANTO BIOTECH(INDIA) LTD, MUMBAI V. ADDL CIT RG 1(2), MUMBAI

ITA 6192/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8187 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU JIT BANGAR
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMB ER . / ITA NO. 6192 / MUM./ 2011 ( / ASSESSMENT YEAR : 20 0 6 07 ) MAHYCO MONSANTO BIOTECH (I) LTD. RESHAM BHAVAN, 4 TH FLOOR 84, VEER NARIMAN ROAD M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S ASSTT. COMMISSION ER OF INCOME TAX RANGE 1(2), MUMBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AABCM0176B . / ITA NO. 8801 / MUM./ 2011 ( / ASSESSMENT YEAR : 20 07 08 ) MAHYCO MONSANTO BIOTECH (I) L TD. RESHAM BHAVAN, 4 TH FLOOR 84, VEER NARIMAN ROAD M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE 1(2), MUMBAI .... / RESPONDENT . / PERMANENT AC COUNT NUMBER AABCM0176B / REVENU E BY : SHRI SUJIT BANGAR / ASSESSEE BY : SHRI KIRIT KAMDAR A/W MS. POOJA BHATTACHARJEE / DATE OF HEARING 10 .0 9 .2014 / DATE OF ORDER 19.09.2014 MAHYCO MONSANTO BIOTECH (I) LTD. 2 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL S HA VE BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 1 ST JULY 2011 , FOR THE QUANTUM OF ASSESSMENT UNDER SECTION 1 43(3), FOR THE ASSESSMENT YEAR 2006 07 AND ORDER DATED 12TH OCTOBER 2011, FOR THE ASSESSMENT YEAR 2007 08, PASSED BY THE LEARNED COMMISSIONER (APPEALS) II , MUMBAI . THE COMMON ISSUE INVOLVED IN THESE APPEALS, EXCEPT VARIATION IN FIGURES, RELATES TO DISALLOW ANCE UNDER SECTION 14A, R/W RULE 8D, AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). AS A MATTER OF CONVENIENCE, THE GROUNDS RAISED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006 07, WHICH IS ALSO SIMILAR FOR THE ASSESSME NT YEAR 2007 08, ARE REPRODUCED HEREIN BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THAT THE ASSESSING OFFICER HAS RIGHTLY COMPUTED DISALLOWANCE UNDER SECTION 14A REA D WITH RULE 8 D . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING PART OF THE INTEREST EXPENDITURE O F ` 1,37,748/ - U /S 14A R /W R ULE 8D . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING PART OF A DMINISTRATIVE EXPENDITURE AMOUNTING TO ` 23,23,005/ - UNDER S ECTION 14A READ WITH RULE 8 D AS AGAINST AN AMOUNT OF RS 5,00,000/ - DISALLOWED BY THE APPELLANT IN RETURN OF INCOME. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL THE APPELLANT SUBMITS THAT, SINCE RULE 8 D HAS BEEN INTRODUCED ONLY W.E.F. 24 MARCH 2008 I T SHOULD NOT BE APPLIED FOR AY 2006 - 07. MAHYCO MONSANTO BIOTECH (I) LTD. 3 2. IN THE ASSESSMENT YEAR 2006 07 , THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF ` 3,10,54,718, AND IN THE ASSESSMENT YEAR 2007 08, IT HAS SHOWN DIVIDEND INCOME OF ` 3,26,30,456 , FROM MUTUAL FUNDS . FOR THE PURPOSE OF DISA LLOWANCE UNDER SECTION 14A, IN THE ASSESSMENT YEAR 2006 07, THE ASSESSEE HAS DISALLOWED ` 5 LAKHS , WHEREAS IN THE ASSESSMENT YEAR 2007 08, NO SUCH DISALLOWANCE WAS OFFERED. THE ASSESSING OFFICER HELD THAT THE DISALLOWANCE UNDER SECTION 14A, HAS TO BE MADE IN ACCORDANCE WITH RULE 8D, AND ACCORDINGLY, HE COMPUTED THE DISALLOWANCE AFTER TAKING 0.5% OF THE AVERAGE VALUE OF INVESTMENT AS PER CLAUSE (III) OR RULE 8D(2) AND, ACCORDINGLY, DISALLOWED ` 23,23,005, IN THE ASSESSMENT YEAR 2006 07 AND ` 22,29,956, FOR T HE ASSESSMENT YEAR 2007 08. THE LEARNED COMMISSIONER (APPEALS), THOUGH HELD THAT RULE 8D IS NOT APPLICABLE IN THE ASSESSMENT YEAR 2006 07 AND 2007 08, HOWEVER, RULE 8D PRESCRIBE S A REASONABLE BASIS FOR WORKING OUT THE DISALLOWANCE WHICH CAN BE APPLIED HER E ALSO AND, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS QUITE REASONABLE. 3. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE COMPANY HAS NO BORROWINGS AND THE INVESTMENTS HAVE BEEN MADE IN MUTUAL FUNDS ONLY. FOR THIS PURPOSE, THE ASSESSEE HAS DISALLOWED ` 5 LAKHS IN THE ASSESSMENT YEAR 2006 07. HOWEVER, NO SUCH DISALLOWANCE WAS OFFERED IN THE ASSESSMENT YEAR 2007 08, HE SUBMITTED THAT IN THE ASSESSMENT YEAR 2005 06, THE ASSESSING OFFICER HIMSELF ON SIMILAR FACTS HAS DISALLOWED A SU M OF ` 2 LAKHS FOR THE PURPOSE OF DISALLOWANCE MAHYCO MONSANTO BIOTECH (I) LTD. 4 UNDER SECTION 14A, THEREFORE, IN THIS YEAR, DISALLOWANCE CANNOT BE MADE AS PER RULE 8D. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON PERUSAL OF THE RELEVANT MATERIAL PLACED ON RECORD, WE FIND THAT BOTH THE AUTHORITIES HAVE MADE THE DISALLOWANCE AFTER APPLYING RULE 8D, WHICH ADMITTEDLY IN THESE YEAR S , ARE NOT APPLICABLE IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.). THUS, SOME REASONABLE BASIS FOR DISALLOWANCE HAS TO BE WORKED OUT IN THE YEARS PRIOR TO 2008 09. AS BROUGHT OUT ON RECORD BY THE LEARNE D COUNSEL THAT IN THE ASSESSMENT YEAR 2005 06, THE ASSESSING OFFICER HAS HELD THAT THE DISALLOWANCE OF ` 2 LAKHS FOR THE PURPOSE OF 14A, IS QUITE REASONABLE . HENCE, IF IN THE ASSESSMENT YEAR 2006 07, THE ASSESSEE HAS OFFERED ` 5 LAKHS FOR THE PURPOSE OF DI SALLOWANCE, THE N SAME SHOULD BE CONSIDERED TO BE A REASONABLE BASIS ESPECIALLY LOOKING TO THE FACT THAT INVESTMENTS HAVE BEEN MADE MOSTLY IN THE MUTUAL FUNDS. THUS, FOR THE ASSESSMENT YEAR 2006 07, THE DISALLOWANCE OF ` 5 LAKHS AS OFFERED BY THE ASSESSEE I S QUITE REASONABLE. FOR THE ASSESSMENT YEAR 2007 08 ALSO, WE HOLD THAT THE DISALLOWANCE OF ` 5 LAKHS SHOULD BE MADE AS A PRECEDENCE BECAUSE FACTS ARE QUITE SIMILAR. THE DISALLOWANCE OF ` 5 LAKHS WOULD BE QUITE REASONABLE FOR ALLOCATION OF ADMINISTRATIVE EX PENSES FOR THE PURPOSE OF MAHYCO MONSANTO BIOTECH (I) LTD. 5 EARNING DIVIDEND INCOME. ACCORDINGLY, APPEAL FOR THE ASSESSMENT YEAR 2006 07 IS ALLOWED, WHEREAS THE APPEAL FOR THE ASSESSMENT YEAR 2007 08 IS PARTLY ALLOWED. 6. 2006-07 2006-07 7. IN THE RESULT, ASSESSEES APPEAL FOR THE A.Y. 2006 07 IS ALLOWED AND THE APPEAL FOR THE A.Y. 2007 08 IS PARTLY ALLOWED. 19 TH SEPTEMBER 2014 ORDER PRO NOUNCED IN THE OPEN COURT O N 19 TH SEPTEMBER 2014 SD/ - . . R.C. SHARMA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 19 TH SEPTEMBER 2014 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMBAI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI