DCIT 5(3), MUMBAI V. SUASHISH DIAMONDS LTD, MUMBAI

ITA 6531/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9125 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, B BB B INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , IOU IOUIOU IOU , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER /.ITA NO.6531/MUM/2014, /ASSESSMENT YEAR-2007-08 DCIT 5(3), ROOM NO. 573, AAYAKAR BHAVAN, 5 TH FLOOR, M.K.MARG, MUMBAI-400020. VS. M/S. SUASHISH DIAMONDS LTD. MEHTA MAHAL, 11 TH FLOOR, 15 MAHTEW ROAD, OPERA HOUSE, MUMBAI-400004 PAN: AAACS8246H ( / APPELLANT) ( / RESPONDENT) / REVENUE BY : SHRI VISHWAS MUNDHE (DR) ! ! / ASSESSEE BY : SHRI SASHANK DUNDU (AR) ' ! / DATE OF HEARING : 03 -01-2017 ! '( / DATE OF PRONOUNCEMENT : 06 -01-2017 , 1961 ' 254(1) #!$! ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER PAWAN SINGH, J.M. IOU IOUIOU IOU : 1. THE PRESENT APPEAL BY REVENUE U/S 253 OF THE INCOME -TAX ACT IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-9, MUMBAI (FOR SHORT THE CIT(A) DATED 12.08.2014 FOR ASSESSMENT YEAR(AY) 2007-08. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT DISALLOWANCE U /S 14A SHOULD BE RESTRICTED TO 10% OF DIVIDEND INCOME? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS THAT DISALLOWANCE U/S 14A WE RE MADE BY ADOPTING A REASONABLE METHOD AS DIRECTED BY HONBLE ITAT? (III) THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) BE SET-ASIDE AND THE ORDER OF THE AO BE RESTORED. 2. WE HAVE HEARD THE RIVAL CONTENTION OF THE PARTIES A ND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. LD. AR OF THE ASSESSEE ARGUED THAT THE GROUN DS OF APPEAL RAISED IN THE PRESENT APPEAL ARE SQUARELY COVERED IN ASSESSEES OWN CASE FOR AY 2007-08 IN ITA NO. 8949/MUM/2010. LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE NO T DISPUTED THE FACTUAL MATRIX OF THE CASE. 3. WE HAVE SEEN THAT SIMILAR DISALLOWANCE WAS MADE IN ASSESSEES OWN CASE FOR AY 2006-07 AND THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL W HEREIN THE FOLLOWING ORDER WAS PASSED: 4. AFTER CONSIDERING THE RIVAL ARGUMENTS AND EXAMI NING THE FACTS ON RECORD, WE ARE OF THE OPINION THAT THE ACTION OF THE CIT (A) CANNO T BE UPHELD. APPLICATION OF RULE 8D IS NOT PERMISSIBLE FOR THE IMPUGNED ASSESSMENT Y EAR. WHILE ACCEPTING THAT THE 2 ITA NO. 6531/M/2014 M/S. SUASHISH DIAMONDS. LTD. JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYCE MFG. CO. LTD VS. DCIT IS SQUARELY APPLICABLE, THE L EARNED CIT (A) WENT ON TO DECIDE THE ISSUE ONLY BY RULE 8D. THE APPLICATION OF RULE 8D WILL COME INTO PICTURE ONLY IN CASE AO IS SATISFIED THAT THE WORKING PROVIDED BY A SSESSEE IS NOT, CORRECT. THE HON'BLE BOMBAY HIGH COURT VERY SPECIFICALLY STATED WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY OF THE RULE 8D THAT AO HAS TO SATISFY UNDER SECTION 14A(2); AO HAS NOT DONE ANY EXERCISE OR EXAMINED ASSESSEE'S COMPUTATION. THE SAME WAY THE LEARNED CIT(A) ALSO. EVEN THOUGH ASSESSEE HAS S UBMITTED THAT IT HAS SPENT ONLY AN AMOUNT OF RS.7,76,371 WHICH CAN BE CONSIDERED AS EXPENSES ATTRIBUTABLE TO EARNING DIVIDEND INCOME, HE DID NOT GIVE ANY FINDIN G ON THE ADMINISTRATIVE EXPENDITURE, BUT STRAIGHT AWAY INVOKED 0.5% OF THE INVESTMENT FOR CONFIRMING THE DISALLOWANCE. SINCE ASSESSEE HAS ALREADY OFFERED 10 % OF THE DIVIDEND INCOME AS ESTIMATED EXPENDITURE TO BE CONSIDERED AS EXPENDITU RE INCURRED FOR EARNING THE EXEMPT INCOME UNDER SECTION 14A, WE ARE OF THE OPIN ION THAT NO FURTHER DISALLOWANCE IS REQUIRED. IN FACT THE ITAT IN VARIOUS OTHER CASE S HAS CONFIRMED 2% TO 5% OF THE DIVIDEND INCOME AS REASONABLE EXPENDITURE TO BE DIS A1LOWED UNDER SECTION 14A, SINCE ASSESSEE ITSELF HAS DISALLOWED ABOUT 10% OF T HE DIVIDEND EARNED AS POSSIBLE EXPENDITURE, WE DO NOT SEE ANY REASON TO FURTHER DI SALLOW UNDER THIS HEAD. ACCORDINGLY, WE MODIFY THE ORDER OF THE CIT (A) AND DIRECT AO TO ACCEPT 10% OF THE DIVIDEND ALREADY DISALLOWED BY ASSESSEE AS REASONAB LE EXPENDITURE UNDER SECTION 14A. GROUND IS ALLOWED. 4. CONSIDERING THE ASSESSEES OWN CASE FOR AY 2006-07, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A), WHEREI N THE LD. CIT(A) HAS FOLLOWED THE DECISION OF TRIBUNAL FOR AY 2006-07. AS A RESULT,APPEAL FILED B Y THE REVENUE IS STANDS DISMISSED. *'+ ,-' VF/KDKJH . / ! 01 UK 2 ! ' 3 . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY,2017. 5 ! 6 7 6 ( , 201 7 ! 01 ; SD/- SD/- ( / RAJENDRA ( IOU IOUIOU IOU / PAWAN SINGH)) ( / ACCOUNTANT MEMBER # ( / JUDICIAL MEMBER 1 /MUMBAI, 7 /DATE: 06.01.2017 SK ' )!*+ ,+! / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ ., ( <' , 4. THE CONCERNED CIT / ., <' 5. DR E BENCH, ITAT, MUMBAI / =>0 '?, B BB B , . . . 1 6. GUARD FILE/ 0 *1 =' ' //TRUE COPY// 5 / BY ORDER, / DY./ASST. REGISTRAR ( ?, , 1 /ITAT, MUMBAI