THE ESTATE INVESTMENT CO. P. LTD, MUMBAI V. ACIT 2(1), MUMBAI

ITA 6658/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49481 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 07-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIWAS RAO
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

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. 6658/MUM/2009. ASSESS MENT YEAR : 2006-07. THE ESTATE INVESTMENT CO. PVT. LTD., ASSTT. COMMISSIONER OF INCOME-TAX, SEKSARIA CHAMBERS, 4 TH FLOOR, VS. 2(1), MUMBAI. NAGINDAS MASTER ROAD, FORT, MUMBAI 400 001. PAN AAACE 2566J APPELLANT. RESPONDENT. APPELLANT BY : SHRI PANKAJ JAIN. RESPO NDENT BY : SHRI GOLI SRINIWAS RAO. 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)-4, MUMBAI DATED 26-11-2009 AND THE SOL ITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS.2,30,456/- M ADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MAKING INVESTMENT IN SHARES AND SECURIT IES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 20- 10-2006 DECLARING A TOTAL INCOME OF RS.3,35,56,340/-. IN THE SAID YEAR, THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.16,24,513/- AND LONG TERM CAPITAL GAIN OF RS.5.2 2 CRORES WHICH WAS CLAIMED TO BE EXEMPT FROM TAX. ACCORDING TO THE AO, THE EXPENS ES INCURRED BY THE ASSESSEE IN 2 ITA NO. 6658/MUM/2009 ASSESSMENT YEAR : 2006-07. RELATION TO EARNING OF THE SAID EXEMPT INCOME WERE LIABLE TO BE DISALLOWED U/S 14A. ACCORDINGLY HE WORKED OUT SUCH EXPENSES AS PER RULE 8D OF INCOME TAX RULES, 1962 AT RS.2,30,456/- AND A DISALLOWANCE TO THAT EXTENT WAS MADE BY HIM U/S 14A. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIR MED THE SAID DISALLOWANCE MADE BY THE AO. AGGRIEVED BY THE ORDER OF THE LEARN ED 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 ON RECORD. AS HELD BY THE HONBLE BOMBAY H IGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. (2010) 234 CTR (BOM) 1, RULE 8D OF INCOME TAX RULES, 1962 IS APPLICABLE ONLY PROSPECTI VELY FROM ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY HONBLE BOMBAY HIGH COU RT, THE DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A PRIOR TO ASSESSMENT YEA R 2008-09 HAS TO BE MADE BY ADOPTING SOME REASONABLE METHOD. THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY TH E AO U/S 14A BY APPLYING RULE 8D IS, THEREFORE, SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO DETERMINE THE QUANTUM OF EXPENSES TO BE DISALLOWED U/S 14A BY ADOPTING SOME REASONABLE METHOD AS HELD BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. (SU PRA) 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED AS INDICATED ABOVE. . ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED: 15 TH JULY, 2011. 3 ITA NO. 6658/MUM/2009 ASSESSMENT YEAR : 2006-07. 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. WAKODE