RAYMOND APPAREL LTD, MUMBAI V. ADDL CIT RG 2(3), MUMBAI

ITA 665/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4026 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER. AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.665/MUM./2010 (ASSESSMENT YEAR : 200607 ) DATE OF HEARING: 31.8.2010 RAYMOND APPAREL LIMITED NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE MUMBAI 400 001 AAAC12732K .. APPELLANT VERSUS ADDL. COMMISSIONER OF INCOME TAX RANGE 2(3), AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI HARSH SHAH REVENUE BY : SHRI NARENDRA SINGH O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL BY THE ASSESSEE, IS DIRECTED AGAINST TH E ORDER DATED 1 ST DECEMBER 2009, PASSED BY THE LEARNED CIT(A)VI, MUM BAI, FOR ASSESSMENT YEAR 200607. THOUGH THE ASSESSEE HAS RAISED AS MAN Y AS FIVE GROUNDS OF APPEAL, BUT THE SOLE ISSUE ARISING OUT OF THESE GRO UNDS OF APPEAL IS, WHETHER OR NOT, THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDI NG THE ASSESSING OFFICERS ACTION IN SIMPLY APPLYING THE RATIO OF 0.5% OF THE TOTAL AVERAGE VALUE OF INVESTMENT (I.E., OPENING AND CLOSING VALUE OF INVE STMENT) AS PER RULE 8D(2)(III) TO DERIVE AT THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A. 2. FACTS IN BRIEF ARE THAT, THE ASSESSEECOMPANY, IN T HE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF MAN UFACTURING AND ITA NO.665/MUM./2010 RAYMOND APPEAREL LTD. 2 PROCESSING OF GARMENTS AND ALSO IN THE BUSINESS OF RETAIL AND TRADING IN ACCESSORIES. THE ASSESSEE IS A SUBSIDIARY COMPANY O F RAYMONDS LIMITED, BUT DEALS IN READYMADE GARMENTS WITH VARIOUS BRAND NAME LIKE PARK AVENUE, PARX, MANZONI, NOTTINGHILL, ZAPP. 3. THE ASSESSEE COMPANY HAD CLAIMED AN AMOUNT OF ` 87,953 AS DIVIDEND INCOME TREATING THE SAME AS EXEMPT U/S 10 OF THE IN COME TAX ACT, 1961. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPL AIN AS TO WHY INTEREST U/S 14A SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE ASSESSING OFFICER, FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD., VIDE ORDER DATED 20 TH OCTOBER 2008, COMPUTED THE DISALLOWANCE AS PER RULE8D, WHICH WOR KED OUT TO ` 8,55,000. 4. THE ASSESSEE, BEING AGGRIEVED BY THE STAND OF THE A SSESSING OFFICER, CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A), WHO CONFIRMED THE ASSESSING OFFICERS ACTION. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE CONTEND S THAT THE ASSESSING OFFICER, RELYING ON THE SPECIAL BENCH DEC ISION OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA) COMPUTED THE DISALLOWANCE AS PER RULE 8D, HOWEVER, IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE LTD. VS ACIT, WHEREIN, IT HAS BEEN HELD THAT RULE 8D IS PROSPECTIVE IN OPERATION , THE SAID RULE 8D COULD NOT BE APPLIED FOR A.Y. 2006 07, AS THE SAID RULE WAS BROUGHT BY INCOME TAX (FIF TH) AMENDMENT RULES, 2008, W.E.F. 24 TH MARCH 2008. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE OR DER OF THE AUTHORITIES BELOW. 6. HAVING HEARD BOTH THE PARTIES AND HAVING PERUSED TH E ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON REC ORD, WE FIND THAT THE QUESTION OF MAKING DISALLOWANCE UNDER SECTION 14A I S NO MORE RES INTEGRA IN VIEW OF THE RECENT JUDGMENT OF THE HON'BLE BOMBAY H IGH COURT IN GODREJ & BOYCE LIMITED VS ACIT, VIDE JUDGMENT DATED 12 TH AUGUST 2010, WHEREIN, IT ITA NO.665/MUM./2010 RAYMOND APPEAREL LTD. 3 HAS BEEN HELD THAT THE PROVISIONS OF SECTION 14A AR E APPLICABLE IN SUCH CASES WHERE THE DISALLOWANCE HAS TO BE WORKED OUT BY THE ASSESSING OFFICER ON SOME REASONABLE BASIS. IN VIEW OF THIS, WE SET ASID E THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND RESTORE THE ISSUE BACK TO TH E FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION AND DIRECT HIM TO DECIDE TH E QUANTUM OF DISALLOWANCE IN ACCORDANCE WITH THE AFORESAID JUDGM ENT OF THE HON'BLE BOMBAY HIGH COURT IN GODREJ & BOYCE LIMITED (SUPRA) , AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES IN TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2010. SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- S.V. MEHROTRA ACCOUNTANT MEMBER MUMBAI, DATED: 27 TH OCTOBER 2010 COPY TO : (1) THE ASSESSEE (2) THE RESPONDENT (3) THE CIT(A), MUMBAI, CONCERNED (4) THE CIT, MUMBAI CITY CONCERNED (5) THE DR, BENCH, ITAT, MUMBAI TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ITA NO.665/MUM./2010 RAYMOND APPEAREL LTD. 4 DATE INITIAL 1. DRAFT DICTATED ON 22.10.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 25.10.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 25.10.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 25.10.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 25.10.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 27.10.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 28.10.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER