M/s. LAWKIM LTD., MUMBAI V. ADDL. CIT Rg. - 10(2), MUMBAI

ITA 6543/MUM/2006

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6680 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 14-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 05-12-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Section: 14A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI R.S. PADVEKAR, JUDICIAL MEMBER. I.T.A. NO. 6543/MUM/2006 ASSESS MENT YEAR : 2002-03. M/S LAWKIN LTD., ADDL. COMMISSIONER OF CORPORATE SECRETARIAL DEPARTMENT, VS. INCOME TAX, RANGE-10(2). PIROJSHAN NAGAR, MUMBAI. LBS MARG, VIKROLI (E), MUMBAI 400 089. PAN AAACL2462N APPELLANT. RESPONDENT. AND I. T.A. NO.4551/MUM/2007 ASSE SSMENT YEAR : 2002-03. ADDL. COMMISSIONER OF INCOME-TAX, M/S LAWKIN LTD., RANGE-10(2), MUMBAI. VS. MUMBAI. APPELLANT. RESPONDENT. ASSESSEE BY : SHR I NITESH JOSHI. DEPAR TMENT BY : SHRI M.R. KUBAL. O R D E R. PER P.M. JAGTAP, A.M. : THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 6543/MUM/2006 AND OTHER FILED BY THE REVENUE BEING ITA NO. 455/MU M/2007, ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-X, MUMBAI DATED 22-09-2006. 2 ITA NO.6453/MUM/2006 & ITA NO. 4551/MUM/2007. ASSESSMENT YEAR : 2002-03. 2. GROUND NO. 1.0 AND 1.1 RAISED IN THE APPEAL OF THE ASSESSEE RELATING TO DISALLOWANCE MADE OUT OF INTEREST U/S 14A HAVE NOT BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEF ORE US. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 2. GROUND NO. 2 AND 2.1 RAISED IN THE ASSESSEES AP PEAL AND THE SOLITARY GROUND RAISED IN THE REVENUES APPEAL INVOLVE A COMMON ISS UE RELATING TO DISALLOWANCE MADE U/S 14A OUT OF ADMINISTRATIVE EXPENSES. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPECIALISED ELECTRICAL MOTORS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT O N 31-10-2002 DECLARING A LOSS OF RS.2,66,23,590/-. IN THE SAID RETURN, DIVIDEND INCO ME AMOUNTING TO RS.43,87,088/- WAS CLAIMED BY THE ASSESSEE AS EXEMPT FROM TAX U/S 10(33). ACCORDING TO THE AO, THE VARIOUS EXPENSES DEBITED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACCOUNT WERE PARTLY ATTRIBUTABLE TO EARNING OF THE EXEMPT DIVIDE ND INCOME AND DISALLOWANCE OF SUCH EXPENSES, THEREFORE, WAS REQUIRED TO BE MADE A S PER THE PROVISIONS OF SECTION 14A. HE, THEREFORE, ESTIMATED SUCH EXPENSES ON ADHO C BASIS AT RS.10 LAKHS AND A DISALLOWANCE TO THAT EXTENT WAS MADE BY HIM U/S 14A OUT OF ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT DIVIDEND INCOME. 4. THE DISALLOWANCE OF RS.10 LAKHS MADE BY THE AO U /S 14A OUT OF ADMINISTRATIVE EXPENSES WAS CHALLENGED BY THE ASSES SEE IN AN APPEAL FILED BEFORE THE LEARNED CIT(APPEALS) AND IN THE ABSENCE OF ANY BASIS GIVEN BY THE AO TO JUSTIFY THE QUANTUM OF DISALLOWANCE MADE U/S 14A, T HE LEARNED CIT(APPEALS) HELD THAT THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE WAS NOT FAIR AND REASONABLE. HE HELD THAT IT WOULD BE FAIR AND REASONABLE TO MAKE S UCH DISALLOWANCE TO THE EXTENT OF 2% OF THE TOTAL EXPENDITURE. ACCORDINGLY THE DISALL OWANCE MADE BY THE AO OUT OF 3 ITA NO.6453/MUM/2006 & ITA NO. 4551/MUM/2007. ASSESSMENT YEAR : 2002-03. ADMINISTRATIVE EXPENSES U/S 14A WAS RESTRICTED BY T HE LEARNED CIT(APPEALS). AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE AND ASSESSEE BOTH HAVE RAISED THIS ISSUE IN THE PRESENT APPEALS FILED BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT NO BASIS WH ATSOEVER WAS GIVEN BY THE AO IN THE ASSESSMENT ORDER IN SUPPORT OF THE DISALLOWANCE OF RS.10 LAKHS MADE OUT OF ADMINISTRATIVE EXPENSES U/S 14A AND THE SAME WAS MA DE PURELY ON ADHOC BASIS WITHOUT GIVING ANY REASON WHATSOEVER TO SUPPORT AND SUBSTANTIATE THE SAME. ON THE OTHER HAND, WE FIND THAT THE DISALLOWANCE OF 2% OUT OF TOTAL ADMINISTRATIVE EXPENSES MADE BY THE LEARNED CIT(APPEALS) IS QUITE FAIR AND REASONABLE LOOKING INTO THE FACT THAT ALL THE INVESTMENTS FETCHING EXE MPT DIVIDEND INCOME WERE MADE BY THE ASSESSEE COMPANY IN THE EARLIER YEARS AND T HE ACTIVITY CARRIED ON BY THE ASSESSEE IN THIS REGARD IN THE YEAR UNDER CONSIDERA TION WAS ONLY TO DEPOSIT THE DIVIDEND WARRANTS RECEIVED FROM THE SAID INVESTMENT WHICH WAS MADE IN ONLY SIX SCRIPTS. WE, THEREFORE, FIND NO INFIRMITY IN THE IM PUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS THE APPEAL OF THE REVENUE. 6. AS REGARDS GROUND NO.2 AND 2.1 RAISED BY THE ASS ESSEE IN ITS APPEAL DISPUTING THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT(APPEA LS) OUT OF ADMINISTRATIVE EXPENSES U/S 14A TO THE EXTENT OF 2% OF THE TOTAL A DMINISTRATIVE EXPENSES, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS NOT INTERESTED TO PRESS THESE GROUNDS AS THE LEARNED CIT(APPEALS) VID E AN ORDER PASSED U/S 154 HAS ALREADY GIVEN A SUBSTANTIAL RELIEF TO THE ASSESSEE ON THIS ISSUE BY RESTRICTING THE DISALLOWANCE TO 2% OF THE DIVIDEND INCOME AS AGAINS T 2% OF TOTAL ADMINISTRATIVE 4 ITA NO.6453/MUM/2006 & ITA NO. 4551/MUM/2007. ASSESSMENT YEAR : 2002-03. EXPENSES MADE BY HIS IMPUGNED ORDER. GROUND NO. 2 A ND 2.1 OF THE ASSESSEES APPEAL ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WEL L AS THAT OF THE REVENUE ARE DISMISSED. . ORDER PRONOUNCED ON THIS 22 ND DAY OF JULY, 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED: 22 ND JULY, 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR, ITAT, MUMBAI BEN CHES, MUMBA I.