EWART INVESTMENTS LTD, MUMBAI V. ACIT 2(1), MUMBAI

ITA 6469/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9391 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BURZIS S TARAPOREVALA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT (MZ) AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO.6469/M/2010 ASSESSMENT YEAR:2007-2008 M/S. EWART INVESTMENTS LIMITED, EWART HOUSE, 3 RD FLOOR, HOMI MODY STREET, FORT, MUMBAI 400 001. PAN: VS. ACIT 2(1), ROOM NO.561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BURZIS S. TARAPOREVALA RESPONDENT BY : SHRI RAJEEV PANT, DR DATE OF HEARING: 19.11.2012 DATE OF ORDER: 21.1 1.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 3.9.2010 IS AG AINST THE ORDER OF CIT (A)- 4, MUMBAI DATED 28.6.2010 FOR THE ASSESSMENT YEAR 2 007-2008. 2. GROUNDS RAISED IN THIS APPEAL ARE ARGUMENTATIVE IN NATURE AND THE CORE ISSUE FOR ADJUDICATION RELATES TO QUANTIFICATION OF DISAL LOWANCE OF EXPENDITURE INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE-8D OF THE INCOME TAX RULES, 1962. 3. BRIEFLY STATED THE RELEVANT FACTS OF THE CASE AR E THAT THE ASSESSEE CLAIMED DIVIDEND INCOME OF RS. 834.76 LAKHS AS EXEMPT FROM TAX. ASSESSEES OFFERED A SUM OF RS. 3,54,870/- AS DISALLOWABLE EXPENDITURE INCUR RED FOR EARNING OF THE SAID EXEMPT INCOME. FOR THIS QUANTIFICATION, THE ASSESSEE RELIE D ON THE FINALIZED ASSESSMENTS OF THE EARLIER AYS SUCH AS 2000-2001 AND 2001-2002 WHE RE 20% OF THE RELATABLE DIRECT AND INDIRECT EXPENDITURE IS FOUND REASONABLE EXPEND ITURE FOR DISALLOWANCE. HOWEVER, THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AN D IN PRINCIPLE, HE INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE -8D OF THE I T RULES, 1962. AO DETERMINED THE DISALLOWANCE AT RS. 32,93,770/- AS A GAINST THE ASSESSEES OFFER OF RS. 2 M/S. EWART INVESTMENTS LIMITED 3,54,870/-. IN THE PROCESS, AO RELIED ON THE DECIS ION OF THE SPECIAL BENCH IN THE CASE OF ITO VS DAGA CAPITAL MANAGEMENT PVT. LTD IN ITA NO.8057/MUM/2003. AGGRIEVED WITH THE SAME, ASSESSEE FILED APPEAL BEFO RE THE CIT (A) AND RAISED OBJECTION AGAINST THE INVOKING THE PROVISIONS OF RU LE-8D FOR THE CURRENT ASSESSMENT YEAR 2007-2008. AS PER THE ASSESSEE THE AMENDED PRO VISIONS SHOULD APPLY ONLY FROM THE ASSESSMENT YEAR 2008-2009 ONWARDS PROSPECTIVELY . HOWEVER, CIT (A) REJECTED THE VIEWS OF THE ASSESSEE AND PROCEEDED TO CONFIRM THE ADDITION MADE BY THE AO. THATS HOW, THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL NOW. 4. BEFORE US, AT THE OUTSET, SHRI BURZIS S. TARAPOR EVALA, LD COUNSEL FOR THE ASSESSEE INFORMED THAT THE ISSUE MAY HAVE TO BE REM ANDED TO THE FILES OF AO FOR DECIDING THE ISSUE DE NOVO IN VIEW OF THE BINDING JURISDICTIONAL HIGH COURT J UDGMENT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM). FURTHER, HE MENTIONED THAT THE AO/CIT (A) DID NOT H AVE THE BENEFIT OF THE SAID JUDGMENT DATED 12 TH AUGUST, 2010. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO / CIT (A). 6. WE HAVE HEARD THE ASSESSEE ON THIS LIMITED ISSUE OF REMANDING. IT IS A FACT THAT THE CITED JURISDICTIONAL HIGH COURT JUDGMENT I N THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. WAS NOT DISCUSSED BY AO / CIT (A) AND OBVIOUSLY FOR THE REASON THAT THE SAID JUDGMENT IS PRONOUNCED SUBSEQUENT TO THE D ATE OF THE IMPUGNED ORDER. OTHERWISE, IT IS A FACT THAT THE SAID JUDGMENT UPHE LD THE APPLICABILITY OF THE PROVISIONS OF RULE-8D FROM THE ASSESSMENT YEAR 2008 -2009 AND THE LATER YEARS. HOWEVER, THE REVENUE IS ALLOWED TO MAKE DISALLOWANC E FOR THE ASSESSMENT YEAR PRIOR TO AY 2008-2009 BY ADOPTING REASONABLE BASIS . HOWEVER, AO IS EXPECTED TO GIVE REASONS FOR REJECTING THE BASIS OF DISALLOWANC E ADOPTED BY THE ASSESSEE QUANTIFYING THE DISALLOWANCE. THEREFORE, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE SET ASIDE TO THE FILES OF THE AO FOR ADJU DICATING THE ISSUE AFRESH AFTER CONSIDERING THE CITED JURISDICTIONAL HIGH COURT JUD GMENT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3 M/S. EWART INVESTMENTS LIMITED 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF NOVEMBER, 2012. SD/- SD/- (D. MANMOHAN) (D. KARUNA KARA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATE : 21.11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR E, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI