ENGINEERING & AGENCIES P. LTD, MUMBAI V. ADDL CIT RG 6(2), MUMBAI

ITA 6635/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62419 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI N.V. VASUDEVAN, JUDICIAL MEMBER. I.T.A. NO. 6635/MUM/2010 ASSESSMENT YEAR : 2006-07. ENGINEERING & AGENCIES PVT.LTD., ADDL. COMMISSIONER OF STERLING CENTRE, 4 TH FLOOR, VS. INCOME-TAX, DR. A.B. ROAD, WORLI, RANGE-6(2), MUMBAI 400010. MUMBAI. PAN AAACE1612P APPELLANT. RESPONDENT. APPELLANT BY : SHRI V.U. BHATT. RESPONDENT B Y : SHRI P.C. MAURYA. DATE OF HEARI NG : 18-04-2012. DATE OF PRONOUNC EMENT : 16-05-2012, O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-12, MUMBAI DATED 28-06-2010 AND THE SO LITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS.4,45,96 4/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) U/S 14A READ WITH RULE 8D OF THE INCOME- TAX RULES, 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF REPRESENTING VARIOUS MANUFACTURERS OF T EXTILE MACHINERY IN INDIA. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 27-11-2006 2 ITA NO.6635/MUM/2010 DECLARING TOTAL INCOME OF RS.10,98,23,267/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.98,52,660/- RECEIVED IN THE YEAR UNDER CONSIDERA TION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWANCE ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME, HOWEVER, WAS MA DE BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 14A. IN THE ASSESSMENT COMPLE TED U/S 143(3), THE AO WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE IN RELAT ION TO EXEMPT INCOME AT RS.4,45,964/-- BY APPLYING RULE 8D OF INCOME-TAX RU LES, 1962 AND DISALLOWED THE SAID AMOUNT U/S 14A TO THAT EXTENT. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO U/S 14A READ W ITH RULE 8D RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DA GA CAPITAL MANAGEMENT P. LTD. 117 ITD 169 (MUM.) (SB) WHEREIN IT WAS HELD TH AT RULE 8D HAS RETROSPECTIVE APPLICATION. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (2010) 234 CT R (BOM) 1, WHEREIN IT HAS BEEN HELD THAT RULE 8D OF INCOME-TAX RULES, 1962 IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY HONBLE HIGH COURT, THE DISALLOWANCE U/S 14A FOR THE YEARS PRIOR TO ASSESSMENT YEAR 2008 -09 HAS TO BE MADE BY ADOPTING SOME REASONABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE IMPUGNE D ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER T O THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE THE DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY APPLYING SOME REASONABLE METHOD AFTER GIVING THE AS SESSEE AN OPPORTUNITY OF BEING HEARD. 3 ITA NO.6635/MUM/2010 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2012. SD/- SD/- (N.V.VASUDEVAN) (P.M. JAG TAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED: 16 TH MAY, 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE