RAMCHAND K. POPELY, MUMBAI V. DCIT 9(2), MUMBAI

ITA 6534/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59700 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: INDRA ANAND
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE SHRI D.K.AGARWAL (JM) AND SHRI T.R.SOOD(AM) ITA NO.6534/MUM/2010 (ASSESSMENT YEAR:2007-08) MR.RAMCHAND K.POPELY, 188-A, TURNER ROAD, BANDRA (W), MUMBAI-400050. PAN:AAKPP6952-A DY. COMMISSIONER OF INCOME TAX 9(2), MUMBAI. APPELLANT V/S RESPONDENT DATE OF HEARING : 19.1.2012 DATE OF PRONOUNCEMENT : 19.1.2012 APPELLANT BY : MS.INDRA ANAND RESPONDENT BY : SHRI C.G.K.NAIR O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.6.2010 PASSED BY THE L D. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A O OBSERVED THAT THE ASSESSEE CLAIMED DIVIDEND INCOME OF RS.11,21,932/- AS EXEMPT U/S 10(34) OF THE ACT. HE FURTHER OBSERVED THAT NO EXPENDITURE HAD BEEN ATTRIBUTED TOWARDS EARNING OF THE DIVIDEND INCOME. HE THEREFORE, INVOKED THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE ITA NO.6534/MUM/2010 (ASSESSMENT YEAR:2007-08) 2 INCOME TAX RULES, 1962 AND DETERMINED THE SUM OF RS.68,17,99/- AS EXPENDITURE INCURRED IN EARNING TH E EXEMPT INCOME AND DISALLOWED THE SAME OUT OF THE TOTAL EXPENSES DEBITED TO THE PROFIT AND LOSS ACCO UNT. IN THIS REGARD, THE AO RELIED ON THE DECISION OF TH E SPECIAL BENCH OF THE TRIBUNAL IN ITO V/S DAGA CAPITAL MANAGEMENT P. LTD. 312 ITR (AT) 1 (SB) (MUM). ON APPEAL, THE APPELLANT CONTENDED THAT IT HAD NOT INCURRED ANY EXPENDITURE IN EARNING THE DIVIDEND INCOME AND THE AO ARBITRARILY DISALLOWED T HE IMPUGNED SUM. HOWEVER, THE LD. CIT(A) WHILE AGREEING WITH THE VIEWS OF THE AO UPHELD THE DISALLOWANCE MADE BY THE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWIN G GROUND OF APPEAL: 1. THE LD. CIT(A)-20, MUMBAI ERRED IN UPHOLDING THE DISALLOWANCE OF RS.6,81,799/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 4. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE IS COVERED BY THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ & BOYCE MFG. CO. LTD., V/S. DCIT IN (2010) 328 ITR 81 ITA NO.6534/MUM/2010 (ASSESSMENT YEAR:2007-08) 3 (BOM.), THEREFORE, THE ISSUE MAY BE DECIDED ACCORDINGLY. 5. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD, WE FIND THAT THE ISSUE STANDS COVERED BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD., (SUPRA), WHEREIN THE IR LORDSHIPS AFTER CONSIDERING THE DECISION OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. 312 I TR (AT) 1 (SB) (MUM) ; 117 ITD 169 (MUM)(SB); WHILE HOLDING THAT THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONALLY VALID HAVE HELD VIDE PLACITUM 88(VI) APPEARING AT PAGE 138 OF THE 328 ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; ITA NO.6534/MUM/2010 (ASSESSMENT YEAR:2007-08) 4 RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT, WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE O F THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH I N THE LIGHT OF THE DIRECTIONS OF THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE ABOVE CITED CASE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH JAN.,201 2. SD SD (T.R.SOOD) (D.K.AGARW AL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, 19TH JANUARY, 2012 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI