M/S. ULTRAMARINE & PIGMENTS LTD, MUMBAI V. THE ADDL CIT RG 7(3), MUMBAI

ITA 628/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8955 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 08-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Section: 14A

Judgement Text

1 ITA 628/MUM/09, M/S ULTRAMARINE & PIGMENTS LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI P.M. JA GTAP, A.M. ITA NO. 628/MUM/2009 ASSESSMENT YEAR 2005-06 M/S ULTRAMARINE & PIGMENTS LTD., THIRUMALAI HOUSE, PLOT NO. 101/102, SION MATUNGA EST, SCH NO. 6, RD NO. 29, SION (E), MUMBAI 400 022. PAN AAACU0718 Q VS. ADDL. CIT, RG. 7(3), AAYAKAR BHAWAN, MUMBAI . 20 APPELLANT RESPONDENT APPELLANT BY SHRI HERO RAI RESPONDENT BY SHRI SUMEET KUMAR ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-VII, MUMBAI DATED 16.12.08. 2. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE OF ` 50,000/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A OUT OF M OTOR CAR AND CONVEYANCE EXPENSES. 3. IN THE ABSENCE OF LOG BOOK OR ANY OTHER RECO RD MAINTAINED BY THE ASSESSEE COMPANY, THE DISALLOWANCE OF ` 50,000/- WAS MADE BY THE A.O. OUT OF MOTOR CAR AND CONVEYANCE EXPENSES CLAIMED BY IT. THE LD. CIT(A) CONFIRMED T HE SAID DISALLOWANCE ON THE GROUND THAT SIMILAR DISALLOWANCE MADE IN ASSESSEES OWN CA SE IN THE EARLIER YEARS WAS UPHELD BY HIM. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE 2 ITA 628/MUM/09, M/S ULTRAMARINE & PIGMENTS LTD. US, A SIMILAR DISALLOWANCE MADE OUT OF MOTOR CAR AN D CONVEYANCE EXPENSES IN ASSESSEES OWN CASE IN EARLIER YEARS HAS ALREADY BEEN DELETED BY THE TRIBUNAL. HE HAS ALSO FILED COPIES OF THE TRIBUNALS ORDER FOR A.Y. 1995-96, 20 03-04 AND 2004-05 AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR DISALLOWANCE MADE IN THESE YEARS OUT OF MOTOR CAR AND CONVEYANCE EXPENSES FOR IDENTICAL REASONS HAS BEEN DELETED BY THE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAID ORDERS OF THE TRIBU NAL, WE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) OUT OF MOTOR CAR AND CONVEYANCE EXPENSES IN THE YEAR UNDER CONSIDERATION AND ALLOW GROUND NO . 1 OF ASSESSEES APPEAL. 4. GROUND NO. 2 RELATES TO THE ISSUE OF DISALLO WANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) OUT OF ADMINISTRATIVE EXPENSES AN D FINANCIAL CHARGES BY INVOKING THE PROVISIONS OF SECTION 14-A. 5. DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE COMPANY HAD EARNED INCOME BY WAY OF DIVIDEND AMOUNTING TO ` 1,18,01,904/- WHICH WAS EXEMPT FROM TAX. ACCORDIN G TO THE A.O., THE ADMINISTRATIVE EXPENSES AND FINANCIAL CHARGES INCURRED BY THE ASSESSEE WERE PARTLY ATTRIBUTABLE TO EARNING OF THE SAID EXEMPT I NCOME AND BY WORKING OUT THE QUANTUM OF SUCH EXPENSES ON PROPORTIONATE BASIS AT ` 22,58,246/-, HE MADE A DISALLOWANCE TO THAT EXTENT BY INVOKING THE PROVISIONS OF SECTION 14-A. 6. THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. IN INVOKING THE PROVISIONS OF SECTION 14-A TO MAKE THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES AND FINANCIAL CHARGES. AS REGARDS THE QUANTUM OF SUCH DISALLOWANCE, HE, HOWEV ER, DIRECTED THE A.O. TO DETERMINE SUCH QUANTUM BY APPLYING RULE 8-D OF THE INCOME TAX RULES, 1962. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE S IDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN ITS RECENT JUDGMENT DELIVER ED IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. 234 CTR (B) 1, THE HONBLE BOMBAY HIGH COU RT HAS HELD THAT RULE 8D OF THE 3 ITA 628/MUM/09, M/S ULTRAMARINE & PIGMENTS LTD. INCOME TAX RULES, 1962 IS APPLICABLE ONLY PROSPECTI VELY I.E FROM A.Y. 2008-09. IN THE SAID JUDGMENT, THE HONBLE BOMBAY HIGH COURT HAS AL SO HELD THAT THE QUANTUM OF DISALLOWANCE U/S 14A FOR THE YEARS EARLIER TO A.Y. 2008-09 HAS TO BE WORKED OUT BY ADOPTING SOME REASONABLE METHOD. ACCORDINGLY, WE S ET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR WORKING OUT THE QUANTUM OF DISALLOWANCE TO BE MADE U/S 14A OUT OF A DMINISTRATIVE AND FINANCIAL CHARGES BY ADOPTING SOME REASONABLE METHOD. GROUND NO. 2 OF ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON 12 TH JANUARY, 2011. SD/- SD/- (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT A CCOUNTANT MEMBER MUMBAI, DATED 12 TH JANUARY , 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VII - MUMBAI 4. THE CIT- 7 MUMBAI 5. THE DR BENCH, F 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 628/MUM/09, M/S ULTRAMARINE & PIGMENTS LTD. ` DATE INITIALS 1. DRAFT DICTATED 3.1.2011 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 4.1.2011 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.